February 12, 2014
Annuities (fixed, variable, and index specifically) are poor investments for most people in most cases. Why? Alternatives?
Annuities (fixed, variable, and index specifically) are poor investments for most people in most cases. Why? Alternatives?
Annuities tie up your money for normally a few years at a time, they may give a you a fixed income of around 3-5% yearly, but they have such high fees, commissions and overall and yearly costs you normally dont come out of it very good, there is also a large penalty for taking out the annuity before the contract is over. So no matter what the people selling the annuities get money. You are much better off buying a No load, index mutual fund from Vanguard which is extremely liquid with the smallest yearly cost around and no commissions. If you really want fixed income you may want to go with a bond fund from Vanguard.
Well said, Garrett. Let’s review.
Annuities are life insurance products that are sold by financial advisors and life insurance agents. The yearly fees are very high when you own one. Why? Those fees are used to pay the high commissions paid to those salespeople I just mentioned. It is that simple. Here is where it gets kind of ugly.
The insurance company locks up your money so they will get their yearly fees and they can compensate their salespeople. If you try to get the money early (prior to 59.5 years of age) you will pay steep penalties to do it. STAY AWAY FROM ANNUITIES.
Follow Garrett’s advice and focus your efforts on no-load index mutual funds. Look at doing this in tax deferred options like a 401(k) at work or a Roth IRA at a place like Vanguard.com. You can also purchase these tax efficient funds outside of retirement accounts at Vanguard. The key is to understand what you are doing and why you should do it. Learn more about annuities here: http://www.youtube.com/watch?v=9-HSrtO5Dcw