Pros and Cons of Getting An Annuity

​An annuity is a financial contract between you and your insurance company and is often used as a retirement plan. You can fund your annuity by paying a lump sum amount or making smaller regular payments over time. After you retire, you may get your money in a similar manner; through small payments or “annuities” or in a lump sum amount.

Pros of getting an annuity

1. Financial security
   Aside from your 401(k), an annuity is an excellent supplementary plan for your retirement. Depending on the performance of the market, you will most likely get more for your money due to the interest rate. The result? A financially secure future that will help you enjoy a worry-free retirement.
   
   
2. Tax-deferred contributions
   You can make contributions to your annuity before you pay taxes, which is another way of saying they are tax-deferred. Until you start receiving your annuities, you won’t have to worry about taxes. This also implies that your money can have significant growth while you make your contributions.
   
   
3. Death benefit
   A variable annuity allows you to invest your contributions in various areas but often comes with a certain level of risk. But if your investments perform well, a variable annuity can earn you much more money than a fixed annuity.
   
   Moreover, variable annuities have a death benefit. A basic variable annuity will cash out the amount equal to the money you already contributed. For other annuities, you can get an enhanced death benefit that can pay more than your actual contribution amount.
   
   
4. Guaranteed returns
   Fixed annuities have a fixed interest rate for the entire life of your contract. So after you finish your payments, you are guaranteed a certain amount that doesn’t rely on the performance of the market, unlike variable annuities.

Cons of getting an annuity

1. High fees
   Annuity fees can be expensive, and you may have to prioritize other expenses before you pay an annuity. And if you want to make changes with your plan, it usually comes with extra fees.
   
   
2. Growth may not reflect the stock market performance
   Even if the stock market is performing well, your variable annuity may not have the exact same growth.

Conclusion
Bottom line? An annuity is perfect for people who are both nearing retirement and have the capacity to pay for it. If you’re not sure if an annuity is right for you, you can consult with a financial advisor for help.

At Oncken Insurance Agency, we do our best in making sure that our clients are well-protected with affordable and comprehensive policies. We make sure to go the extra mile to help you with your needs. To learn more about how we can help you, please contact our agency at (281) 256-8310 or Click Here to request a free quote.