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1. Pros and Cons of
Annuities Investments
by
The Annuity Report 2011
Pros and Cons of Annuities Investments

2. Annuities, like any product, financial or otherwise, have
positive and negative attributes. Timing is a big factor in
making the decision to invest in an annuity so let's assume
that you are in the market.
The benefits of owning an annuity are easy to understand
and make the product a real possibility for almost everyone
at some point in life. Remember, this is a general list and
each product type will have a slightly different set of pros
and cons. Refer to the website for product specific benefits
and disadvantages.
The PROS as I see them:
• Safety of Capital: Insurance companies are required to
keep a certain level of reserves on hand to ensure your
money is safe. Some of the best companies in the
industry are stronger than ever today, which makes an
investment in those companies a very solid bet. In
addition, each state has a guaranty fund to back up
deposits with insurers. For the most part, that coverage
is limited to $100,000 but New York and Florida expand
the coverage to $500,000 and states are continually
increasing the protection to keep in line with the growth
of accounts. Each state is different so it's best to look in
to the laws of your state.
• Tax Deferral: Earnings are sheltered from annual
taxation just like an IRA. This is one big advantage
Pros and Cons of Annuities Investments

3. annuities have over other safe cash alternatives such as
CDs or money market funds.
• Guaranteed Income: New York Life and the Wharton
Business School collaborated on a study to find the most
effective way to maximize retirement income. Immediate
annuities were found to be the best source of a
guaranteed lifetime stream of income. Most annuity
contracts can be converted into monthly income that will
last as long as you do with many index and variable
annuities offering highly beneficial future income
guarantees.
• Rate of Return: Historically, annuities fall on the
conservative side in regard to yield. Insurance
companies receive higher institutional rates on bonds
than you can get in the open market which usually
translates to a competitive return that easily outpaces
rates on CDs and money market funds. In most
markets, you'll find annuities to be a safe, consistent
alternative to market fluctuations.
• Liquidity: Annuity contracts have an annual free
withdrawal provision giving the account holder access to
10-15% of the account value annually without penalty.
The CONS as I see them:
• Not Good For Short Term Money: Annuities are not
Pros and Cons of Annuities Investments

4. the right place to put money if you need all of it back in
one lump sum within a year or two. Keep all annuity
purchases within your appropriate time horizon. Short
term money should be kept in the bank.
• Surrender Schedule: There is no upfront sales charge
associated with annuity purchases and the insurance
company incurs certain costs in placement and ongoing
management of contracts. In exchange for that, the
company will impose a surrender charge on you if you
take the money out before the contract matures. This is
standard but be sure that these terms are understood
and a full explanation of this provision is justified.
• Liquidity: Okay, I know what you're thinking. Wasn't
liquidity listed as a Pro? Yes it was. This can work for or
against you and it goes along the same lines as the point
I made with short term money. What will the money be
used for? When will you need it? How much will you
need? Answer those questions and the rest of the article
should give you an idea if liquidity is a pro or a con for
you.
That is about as black and white as I can make it. Before you
go too far, realize that there are a lot of gray areas. Certain
details about your individual financial situation will clear that
up and make it very obvious as to whether an annuity is the
right choice and which specific product is best.
Pros and Cons of Annuities Investments