An annuity is an insurance product designed to guarantee income for life regardless of the amount of principal remaining that funded the account at inception. It is the only financial product available on the market today that can provide that guarantee. Bonds, stocks, mutual funds. Before you run out and purchase an annuity, it is important to learn more about the different types of annuities and which one is right for your situation. Remember, no stockbroker or financial advisor can ever guarantee stable income for life from securities or investments that go up and down in value.
Since there are several types of annuities, there is a lot of controversy about which one is best. Funds invested in a fixed or fixed indexed annuity are not subject to stock market risk. Funds invested in a variable annuity however are subject to stock market risk and generally higher fees. It is not unusual for a variable annuity to have annual fees that can exceed 4%. When you hear or read negative comments about annuities, generally speaking it involves the variable annuity or the immediate annuity.
