Some people love annuities. In fact, over 90% of people who own an annuity still have their first one. However, there is the camp that hates annuities with a burning passion and who will give you a number of reasons why you should avoid owning one. There are generally two ways that people come to own annuities. The first is outright buying annuities — usually to help manage money in retirement. The second is as the result of a personal injury case — settlement annuity payments are usually used and encouraged since they are tax sheltered. Here are a few of the main reasons that people hate annuities.
1. They’re Tough to Get Rid Of.
This is a big one. People don’t like annuities because they’re pretty tough to get rid of — actually, in some cases they’re still around after the owner dies. Of course that’s the choice of the owner, but the point is that getting out of an annuity is tough to do and there aren’t a ton of options for doing it.
2. There are a Ton of Options.
Another reason people hate annuities is that there are so many options for interest rates, payouts, target dates, and so on. It’s enough to make your head spin. There are a number of different kinds of annuities, each with its own set of advantages and disadvantages depending on what the owners goals are. For some people, choosing a simpler investment just makes more sense.
3. There are Fees and Penalties.
This is one of the main reasons that people hate annuities is that there can be major fees and penalties if you try to withdraw any of the funds before the target date. This means that the owner is stuck with incremental settlement annuity payments or an annuity payout. If the owner needs a large lump sum, there is a way to sell structured settlement payments, but that can be complicated and require going to court.
Do you hate annuities? Feel free to let the hate flow in the comments. Good refereneces.
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