Buying Annuities?

Many folks, perhaps the majority who buy them, are not totally familiar with annuities and their varieties.

To start with, they should know what are available. That begins with knowing that the conventional annuity guarantees a fixed amount of income that returns both principal and interest. There is no hedge against inflation.

Then there is the variable annuity or an equity-indexed annuity. It returns the higher of a fixed interest rate or an index such as the Standard & Poor’s 500 Stock Index. Other methods may be used and can be controversial.

Downsides of annuities that many investors overlook include steep early surrender costs and insurance charges that they may not need and which they are incurring.

Therefore, buying annuities may not be what the salesmen promise for everyone.