Annuities have become a popular retirement investment option in recent years, with sales reaching record-breaking numbers in the first quarter of 2023. According to LIMRA, annuity sales topped $90 billion in the first quarter, a 47% increase from the same quarter in 2022. While annuities can provide a source of steady income for life, they also come with risks and drawbacks that investors should consider before committing to this type of investment.
One of the main benefits of annuities is protection from downside risk. The best part about fixed index annuities is that they offer a guaranteed minimum interest rate, along with the potential for higher returns based on the performance of a stock market index. This means that investors can earn a decent return on their investment without worrying about losing money due to market fluctuations. The closer you get to retirement, the more protection you want, making annuities an attractive option for those nearing retirement age.
Another advantage of annuities is that they provide a source of income for life. This can be especially appealing for retirees who are concerned about running out of money in their later years. Annuities can be structured to provide a fixed income stream for a set number of years or for the rest of the investor's life, ensuring that they will always have a steady stream of income to cover their expenses.