'Q: Is a DA a good buy?
A: There are many articles and websites that are intended to frighten or discourage people from purchasing deferred annuities, or oppositely, to over-hype them. Neither approach is correct. The vast majority of these opinions have one thing in common: they are usually trying to sell you something!
Any one-dimensional view of a product will devalue or ignore advantages and disadvantages. If you have a low risk appetite for example, many DA contracts will offer guarantees (i.e. Insurance), to protect your future income. These are not available in most other types of investments. DA's often contain guarantees that protect the policyholder from possible loss of a significant portion of the original investment, i.e. Insurance against bad events. To simply value the product, only when the economic conditions are favorable, fails to recognize this important protection.
On the downside, some products can have significant fees or high surrender charges over long periods.
There is no doubt that there are some deferred annuities that are not good buys for certain groups or individuals, and there are also some that are not good for any groups. Even within a single product, it might be good for some individuals but not so good for others. Like most products, you have to shop around to find the best fit, or no fit at all.
However, if you have already purchased a deferred annuity, then the best thing that you can do, from here on, is to make sure you use it for maximum financial gain, and not do anything 'stupid'. It's these 'stupid' decisions (or no decisions) that Insurance companies depend on, to maximize their return.
A: There are many articles and websites that are intended to frighten or discourage people from purchasing deferred annuities, or oppositely, to over-hype them. Neither approach is correct. The vast majority of these opinions have one thing in common: they are usually trying to sell you something!
Any one-dimensional view of a product will devalue or ignore advantages and disadvantages. If you have a low risk appetite for example, many DA contracts will offer guarantees (i.e. Insurance), to protect your future income. These are not available in most other types of investments. DA's often contain guarantees that protect the policyholder from possible loss of a significant portion of the original investment, i.e. Insurance against bad events. To simply value the product, only when the economic conditions are favorable, fails to recognize this important protection.
On the downside, some products can have significant fees or high surrender charges over long periods.
There is no doubt that there are some deferred annuities that are not good buys for certain groups or individuals, and there are also some that are not good for any groups. Even within a single product, it might be good for some individuals but not so good for others. Like most products, you have to shop around to find the best fit, or no fit at all.
However, if you have already purchased a deferred annuity, then the best thing that you can do, from here on, is to make sure you use it for maximum financial gain, and not do anything 'stupid'. It's these 'stupid' decisions (or no decisions) that Insurance companies depend on, to maximize their return.
