As part of the process of choosing an
annuity,
you may want to ask yourself three questions:
Is an annuity
the best product for the objective you want to achieve?
If an
annuity is appropriate, should you purchase a deferred
or immediate contract?
Is a fixed
or variable annuity more suited to your needs and
your risk tolerance?
While
annuities are popular because any earnings are
tax
deferred,
and the contracts offer the option
of guaranteed lifetime income, they are also more controversial
than other comparable ways to invest for retirement.
For example, fixed annuities are often criticized
for being vulnerable to inflation and for being inflexible, in
the sense that breaking a contract may be either impossible or
expensive. Variable annuities often come under fire for imposing
high fees and sometimes for the quality of the investment choices
they offer.
What's an Investment Product?
Unlike individual securities,
which you own directly, an investment product pools
investment choices and offers additional services,
such as insurance or professional management. Investment
products include annuities,
managed accounts,
mutual fund wraps,
lifecycle funds,
and
guaranteed investment contracts,
among others.
