Go Beyond the Annuity Myths

by Vince Liuzzi
Executive Vice President and Chief Banking Officer, DNB First


“They’re too complicated.”Annuities

“They’re only for old people.”

“The fees are outrageous.”

“Any extra money you have goes to the insurance company when you pass away.”

Annuities are among the least known of financial vehicles, but often drive the most intense feelings from those who do know about them. They seem to be shrouded in mystery, myth, and even misunderstanding.

So what exactly is an annuity? And are the myths and misconceptions true?

An annuity is a financial product offered by an insurance company that provides a steady stream of income for a person over a set period of time, or for life. Because of the benefit of providing a steady stream of income, annuities are commonly used for retirement.

Despite the misconception, annuities aren’t really all that complicated. You can make a lump sum investment or multiple investments and then, after a specific timeframe, or immediately, if desired, you receive a stream of income for a set period of time, or for life, depending on the annuity.

A popular alternative in today’s financial climate.

With the volatility in today’s financial markets, the low deposit rate environment, and the pressure on Baby Boomers facing retirement, many people are taking a second look at annuities. And with these compelling annuity benefits, it’s easy to see why:

  • Unlimited contributions. Unlike an IRA, there is no limit to the amount of money you can contribute to an annuity.
  • Tax-deferred growth. Money invested in an annuity grows tax-deferred until it is withdrawn.*
  • Protection from market volatility. One only has to review recent stock market activity to understand this benefit from a fixed annuity product.
  • Competitive rates. An annuity can provide a greater rate of return than many CDs, particularly in today’s low-rate environment.
  • Guaranteed income. One of the biggest attractions of annuities is that they pay a guaranteed return until the annuitant (the person who gets the income) dies or thereafter depending on the type of annuity.
  • Bypassing of Probate. If you leave funds in an annuity to your beneficiaries, they won’t have to deal with the time and expense of Probate. In addition, funds in annuities generally can’t be accessed by creditors.

Annuities now offer another benefit that made them less attractive to investors in the past – liquidity. Annuity holders can take advantage of flexible riders that allow them to customize their investment to their unique needs and financial situation. DNB First Wealth Management, for example, offers annuities that will let you take advantage of improved market conditions and choose different death benefit options. In addition, we can ensure that any fees never come from the benefit your annuity generates.

Though annuities offer many benefits, it’s important to note that they aren’t for everyone. At DNB First Wealth Management, we’d be happy to review your situation to determine if annuities may be right for you. We’ll do what’s in your best interest. That’s no myth.

* Consult a professional tax advisor regarding your individual tax situation.

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