Today I’m going to be talking about what I believe to be The Top Five Reasons Why You Should NOT Buy An Annuity.

This video is part of a series I put together where I’m talking all about annuities. If you’re watching this on our YouTube channel, it should be part of a play list, where there’s about four or five videos that are intended to educate you about annuities, to help clear up and clarify some confusion that you might have about annuities and help give you the right education to ask the right questions about an annuity that you own or an annuity that you’re thinking about buying.

The first one is their age and this falls into two categories. Either somebody is too young or too old. Most annuities really cannot be issued much past age 80, and there’s a good reason for that, too. I think, as somebody gets older in years, their need for some of the things that the annuity may do for them really diminishes. I think one of the primary reasons that a lot of people think about buying an annuity is because they want some type of an income guarantee. And, that’s usually something that we think about setting up for somebody as they’re approaching retirement or early in retirement because they can get long term benefits of whatever that guaranteed income stream may be. So, if you’re too old, it may not be appropriate for you to look at an annuity. On the opposite end of the spectrum if you’re young, maybe something that you don’t want to consider as well. Usually people that are, say, under 50 years old that have 10 years or more to retirement, they’re still in the accumulation mode, they’re still in growth mode with their investments typically and an annuity is probably not going to grow nearly to the extent that some other investment alternatives are going to grow at. Some annuities can be expensive, and it’s hard to justify getting into an annuity at an early age with some of those higher expenses and not, offering the same kind of growth potential that other investments can offer. So, if you’re too young, you may not want to look at an annuity as well.

Number two is liquidity issues. If you’re thinking about buying an annuity, this really is intended to be a long term investment vehicle. This is not money that you think you’re going to need or want to take out in any significant way any time, really, in the next 10 years, probably. Most of these annuities, are meant to be lifetime investments, and some things change, maybe, something better comes along or whatever, and people do change them, but you really want to go into it with the intention that this is something that you may keep, really, for the rest of your life. Liquidity is a big factor. Most annuities have some penalties for taking your money out early. Some of those penalties can be pretty significant. Probably the most common time requirement to keep an annuity is probably seven years. Some are a little shorter, some are a little bit longer.

Number three is related to what we talked about with the younger individual, but, you’re still in growth mode If you’re still anticipating that your account is going to grow at a decent rate, similar to the stock market or to what other investments may offer, an annuity is probably not going to be for you. You’re probably going to be disappointed with the returns, because, again, an annuity is intended to be a safer part, potentially, of your retirement portfolio. Again, when I say safe, you, of course, have to look at the issuing creditworthiness of the insurance company that’s issuing the annuity among other things, but, due to some of the guaranties, and the protections that some annuities offer, most people are looking at that to be a safer place.

Number four is you don’t need the income. And, we come across this sometimes, where people, have pensions, they have Social Security, maybe they have other stuff set up, and their need for income is really not all that significant. Again, there may be other reasons that you could be looking at the annuity, but, generally, like I said, most people that are looking at an annuity are probably looking at that for some income or future withdraw benefits that the annuity has, and if you don’t have that need, then, an annuity may not be right for you.

The fifth one, really probably the most important, you don’t understand how the annuity works, or you don’t understand how annuities in general work. So, if you have somebody that you’re talking to about an annuity and they’re giving you details, if you can’t fairly quickly grasp it and understand what that annuity’s going to do for you and how it’s going to fit into your overall portfolio, don’t buy it. You really need to have something that you understand and it could be that the annuity is maybe just way too complicated. Some are more complicated than others. It could be the person that is recommending the annuity, doesn’t fully understand that. And, I’ve seen that many times as well.

So, understand the annuity and if you have questions about an annuity that you’re thinking about buying or even an annuity that you already own, please use us as a resource. You can send me an email, Our phone number will be in the description here on the post. Feel free to call our office, we can schedule just a brief introductory meeting, maybe answer a couple questions that you have. We have access to a complete database of virtually every annuity that’s ever been issued. So, even if it’s something that goes back five or 10 years, we have access to that information, we can run reports on it and help you understand a little bit more about that.