Annuity Pros and Cons  

Pros Of Annuities 

• Principal Protection 
• Income options, including Income for life
• Tax-deferred growth
• Protection from lawsuits and creditors
• Triple compounding of interest 
• Steady, predictable income 
• Penalty-free withdrawals (up to 10%) 
• Cost of living adjustments for inflation 
• Possibly more interest than CD's (fixed annuity)
• Some market upside without risk to principal (index annuity)
• Markets upside tax-deferred (variable annuity)
• Easy to understand (fixed, immediate and longevity annuities) 
• No interest rate risk. Won't lose if rates rise 

Annuity Cons

• Your money is locked up for a period of time (surrender period)
• Fees - Some annuities have fees and some don't
• Withdrawals before age 59 1/2 may be subject to a 10% penalty
• Guarantees are only as good as the companies backing them
• Lower returns than investing directly in the market (fixed annuities)
• Index & variable annuities can be confusing
• Annuities lose a step up of basis at death (gains are taxable to beneficiaries)
• Liquidity - Immediate annuities lose access to principal

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