1. If I die young, the insurance company keeps my money.
If you own an annuity with a “single life only” option and you die soon after your payments begin, the remaining payments cease. However, virtually all annuities offer an option for a guaranteed period of payment, which means you or your heirs will receive payments for a pre-determined number of years no matter what. Usually, these guaranteed periods can be 10, 15 or 20 years long. The term you choose will impact the amount of your payments.
2. I don’t need an annuity. I can just withdraw money from my retirement accounts as I need it.
Yes, you can try to create an income stream from your retirement savings. But, if your investments don’t perform as expected or you live a long life, you may either need to decrease your income and adjust your investment mix, or risk running out of money. A lifetime annuity, on the other hand, provides guaranteed income for your entire life. If you co-own an annuity with a spouse for instance, your annuity can be structured to guarantee income for the duration of his or her lifetime as well.
3. Variable annuities have high and hidden fees.
4. Annuities don’t offer income flexibility.
Actually, annuities can provide a wide range of flexible options for growth potential and receiving income. When used with other retirement savings options, annuities can help you create a diverse retirement income strategy.
5. Once I start receiving annuity income, I can’t transfer money among the different investment accounts.
Once you “annuitize”, it’s true that you can’t transfer the money out of the annuity and into other investment vehicles. Generally, you can modify the investments inside your annuity to address your changing needs.