Annuities Pros and Cons

Retirees often want to know how quickly they can get to their money in case they need to cover extraordinary expenses such as a medical emergency or a home or auto repair. This desire for liquidity may cause them to avoid annuities. However, when you look closely at annuities pros and cons, you'll see that annuities can possibly provide access to funds that can accommodate many circumstances.

For instance, what if you need to take out money before the annuity matures? Most companies will let you remove a portion of your account's value each year without paying a withdrawal charge. This is usually 10%, and once the surrender charge period expires, you'll be able to withdraw as much as you want without paying any penalties to the issuer. Some annuity companies even allow larger withdrawals thereby favorably impacting the annuities pros and cons. But annuities also can allow for other circumstances.

Suppose you are worried about money for future long-term care or a medical emergency? Some annuity companies will give you penalty-free access to your funds if you have to go to a nursing home or come down with a critical illness.

And what about annuities pros and cons for income?

If your situation changes and you need income from an annuity, you will have the opportunity to annuitize the contract and receive payments for a fixed period. You can also get payments that will last your lifetime or even as long as you and your spouse live. Once you annuitize the contract, the annuity is not considered includable for Medicaid qualification purposes in many states (the income could be, however). The ability to annuitize after the first 12 months and the favorable Medicaid treatment are some of the most often noted pluses in a list of annuities pros and cons.

What happens when you die?

Will your survivor get the money he or she might need? In almost all cases, the annuity company will transfer the account's value to your designated beneficiary without any surrender charges, penalties, or probate fees.

What about creditors?

Many annuity agents list the creditor protection feature at the top of the benefits list of annuities pros and cons as many states' laws protect annuities from creditors.

So before you decide that annuities don't offer the ease of access that you might need to your funds, look at the complete picture of annuities pros and cons. Examine what you might need this money for—what situations would you consider potential emergencies. It's possible that an annuity company has just the right option for you.

By reading this article you have learned more about annuities pros and cons and can make a more informed decision.