By Michael Duff

Periodically, I’ll see an article decrying annuities as if they were the bubonic plague.         

Why do annuities receive such negative press in some corners?  I believe it has to do with three things:

1. There are some being sold to the public by some not-so-ethical annuity professionals.
2. The ‘internal’ costs associated with owning annuities are higher than many other investment options.  
3. Investors just aren’t aware of the distinctive features that annuities offer for their higher costs.   

Point #1: There are various types of annuities that may not earn much of a return for the investor (ie: low fixed rate) and also locks the owner into an exorbitant penalty for several years if the owner decides they want to get out of the annuity.      

Point #2: Yes, annuities have higher costs to own but the distinctive features that an annuity owner gets in return might justify the higher costs, in my opinion.

Point #3: The benefit of owning the right kind of annuity is the ability to invest money in the stock market for potentially higher returns while potentially getting a guarantee of getting your money back should things not work out in the market.  In addition, some annuities (the ones I deem suitable) offer the ability to provide a guaranteed lifetime income to the owner and/or an increasing death benefit to the beneficiary/s…even if things don’t work out as planned in the stock market.

So, this kind of annuity, called a variable annuity, can be appropriate for certain investors and therefore don’t deserve the blanket dismissiveness I believe they receive in some corners.     

Mike