Tuesday, January 5, 2010

The Risk of New Annuity Products

Annuities come in all sorts of flavors. Single premium annuities are an all-in type that is purchased in a lump sum. Flexible annuities spread the payments over a period of time. Sometimes these are deferred until a later date whereby the investor can withdraw money all at once or in scheduled payments. Investments grow in a tax-deferred environment. Fixed annuities offer the investor the lowest risk (in part because the insurance company invests in bond funds) which insures your principal is never lost. Immediate annuities are also lump sum investments that begin distributions immediately.

But there is a new variable annuity product coming to market that will attempt to lure Baby Boomers into its trap. Question is whether you understand what this trap offers to your retirement and whether it is worth paying the high cost.

Paul Petillo is the Managing Editor of Target2025.com and a fellow Boomer

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