[Brad]

Write, even if it is a personal point of view.

[David]

Annuities will not pass down generations.

Annuities give you a few percent less return a year than if you just left you money in the market in good mutual/index funds.

Those are two reasons to hate annuities.

[Bryan]

I think the majority of it comes from costs, including possible surrender fees, inability to access funds for a set period of time, and limited returns which will almost certainly underperform the broader market (S&P 500 or total market index fund). Also, some policies don’t include cash refunds so if the primary and secondary beneficiary (i.e. husband and wife in a joint life annuity) die, the estate won’t see that money.

Basically, with annuities, you’re trading some psychological comfort from guaranteed payments for probably 50% of the return you’d capture staying invested in the market over the long haul. For most, it’s not a great tool to create generational wealth.

[Santiago]

Because they are terrible investments.

The S&P over time has averaged just over 10% while even taking the Great Depression into consideration.

While investing into annuities, you’ll average just over 1/2 of the S&P over time.

There is also no other investment product out there where the SALES AGENT or “financial advisor” makes a larger commission. Annuities are big money makers for them.

Most of your money is eaten up by fees and commissions.

The insurance company who sells you the policy actually invests the money into the market. They keep a good portion of YOUR profits and give you the rest.

If you are looking for a babysitter to take care of your money, then jump on it.

Otherwise, invest your own money and keep it all.

If you think about it, the insurance companies CANNOT give you more than the market makes them. So then how do they make money? The ONLY way they can make money is to keep a % of YOUR money in the form of fees.

It’s not that complicated.

[Brett]

They have their place.

Unfortunately, most of the time people get SOLD an annuity that don’t need or shouldn’t have one.

Pay attention to that, they get sold an annuity.

It’s a product that gets sold to them, by a salesperson that will make a bunch of money up front on commission.

They are nice for the risk averse. It’s a good way to guarantee income. It can also be a good way to guarantee your money lasts–like if you have meager savings and are a shopaholic.

However, the returns you see are low. You’re going to give away 2/3rds of your potential gains in order to buy that piece of security.

They typically aren’t able to be passed on–once you die the payments stop. So if legacy money is important to you, you don’t want annuities.

At the end of the day, you could probably outperform any annuity which will give you higher payments during retirement and the possibility of money leftover to pass along as inheritance…but only if you’re disciplined and educated, which I assume you are (or are trying to be) if you’re here and asking questions.

If a financial advisors tries to sell you any sort of insurance or annuity in your first two meetings, see that as a caution flag. They proably view you as a commission check.

[Tom]

As an investment, it’s horrible because you’re likely to yield higher returns investing in a low cost index fund.

As an insurance product it’s useful if you’re really nervous about having a minimum level of income.

Most here are focused on investments and aren’t averse to risk enough that they’re focused on it as insurance.

[Dave]

If you sell stocks from a brokerage account you get preferred tax treatment paying capital gains tax rates. Payments from annuities are taxed as ordinary income. I would also like to add that they are an insurance product and not as safe as people think.

In 2009 AIG the largest Insurance company in the world almost went bankrupt before the government bailed them out.

Had they, millions of annuities would have been in big trouble.

[Trevis]

My take has been because they can be very complicated and often wrapped up in an insurance product which sells you things that you don’t need with costs that are hard to see.

For those in the us, social security is the best annuity money can buy already and depending on your life time earnings, spending needs and ability to differ collection to a later age that for many an annuity isn’t even necessary.

[Jonathan]

Honestly I feel it’s lack of knowledge of the types of annuities. There are products out there with unlimited upside in the sp500, no fees and guarantees on the principal where if you put in $100k and 3 yrs later it’s down and you pass away the principal of what you put in goes as a death benefit to the beneficiary.

The ones with fees are variable annuities with or without income riders or other riders. Yes you do commit to a term of years but if you have a longer time or need guarantees or downside protection there are good options.

If you could be in sp500 with an uncapped upside and with a 20% downside protection over the next 6 years and no fees would that be attractive because they are there.

And yes I’m in the industry and I do not offer products with fees unless the clients needs justify the means.

[John]

Insurance companies never lose. They will make more than you do. They NEVER lose in the end. If you want a guaranteed return they will provide it. And you will pay. Some products are better than others but my comments stand.

Also you will pay massive fees to break the contract. I just did this just to get away fro MetLife because they are so horrible.

The last reason is that my wealthy smart savvy mother hated them and that should be good enough reason for all of us.

[Gerald]

Annuities have a place for the extremely risk averse but the returns, the taxation is bad, they can’t be passed down to children, etc.

Annuities are similar to social security (with worse taxes). Most people already have some form of guaranteed income via SS.

If you want more you could always opt to collect SS later.

If you really want more you can go with an annuity but understand just buying individual long term treasury bonds and living off the interest would give you similar returns and you could pass the principal down to children.

[Author]

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