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Understanding Annuities: A Quick Read Guide

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Did you know that over the last four decades, life expectancy has increased in the U.S.? While there was a concerning decrease in 2020, mainly because of the pandemic, life expectancy is expected to rebound and increase in 2021. As such, building and maintaining your retirement savings is more important than ever if you want to enjoy a long and healthy life.

Of course, that means understanding and maxing out retirement plans like defined contribution plans, 401(k)s, IRAs, and pensions? But have you considered annuities?

For a lot of folks, probably not. That’s not a knock against them — after all, annuities are complex and some come with a lot of fees. Moreover, they’re usually not offered by employees meaning individuals have to purchase them on their own.

At the same time, annuities have their advantages — mainly a guaranteed income stream for a specific time period or until you die. Additionally, you can name a beneficiary so the remaining value can be passed on to them.

But, to determine whether or not an annuity makes sense for you, here’s a quick read guide so that you’ll better understand them.

An annuity is simply a contract between you and an insurance or annuity company. The main selling point of an annuity is that it offers principal protection, lifetime income, legacy planning, or long-term care costs.

When shopping for annuities, they might be marketed as investments. The investment is in your future income during retirement. It is a contract — not a regular retirement

“It’s important to understand that annuities are contracts, not investments,” explains Stan “The Annuity Man” Haithcock. “Comparing the two is a colossal waste of time, in my opinion. It’s apples and oranges.”

I’ve come up with an acronym that covers what annuities contractually solve for. That acronym is P.I.L.L.

Because you’re locked into a contract, if you break any contractual obligations, expect hefty penalties. Unfortunately, this also makes annuities not as accessible as the money you have in a savings account.

Even if you........

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