The Ultimate Guide To AnnuitiesYour One-Stop Resource for Retirement
What are its disadvantages?
The disadvantages of owning an immediate annuity will depend more on whether the annuity is fixed or variable.
An immediate fixed annuity may cause the loss of purchasing power of the money you’ve invested. While immediate variable annuities may come with higher fees. For example, considering a fixed annuity will mean a secure payment for a long period, we must keep in mind that the amount of those payments will be the same each month during that period and that same amount will possibly worth less after 40 years of inflation.
On the other hand, variable immediate annuities could help you to protect your money from inflation, but it’s not always effective. The payments will depend on the markets ups and downs and the performance of our investments. This could be a risk move if we do not have a secure income source to pay our daily needs, and if that’s the case a negative fluctuation could be devastating for our retirement plan.