Are Income Annuities A Good Deal?

Posted by D4L | Thursday, July 22, 2010 | | 0 comments »

Guaranteed retirement income has become a hot topic In the wake of the 2008 market crash, with financial planners and government policymakers alike looking for ways to reduce retiree exposure to equities and boost sources of guaranteed income. Much of the buzz has focused on the humble single premium income annuity (SPIA), which offers regular monthly payments for life in return for an upfront lump payment to an insurance company. An SPIA can be a solid strategy for insuring against longevity risk--the risk of outlining your money.

But Charlie Farrell isn't buying into the income annuity hype. Farrell is a principal at Northstar Investment Advisors and author of Your Money Ratios: 8 Simple Tools for Financial Security (Avery, 2009). He offers this criticism of income annuities: "Giving up your life savings to an insurance company is a high-cost way to get a modest amount of additional income. It's also risky, because an insurer can go out of business."

Source: SecondAct Investing

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