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Benefits of Annuities: Why Consider Them?
Annuities provide several advantages that make them appealing for retirement planning. First and foremost, they offer a reliable income stream, which can be particularly reassuring if you're concerned about outliving your savings. Additionally, annuities can be customized with riders for inflation protection, long-term care, or guaranteed death benefits, enhancing their flexibility and utility. Tax-deferred growth is another significant benefit, allowing your investment to compound over time without immediate tax implications1.
Real-World Examples and Considerations
Consider a retiree who opts for a fixed immediate annuity with a $100,000 investment. Depending on the terms and the retiree's age, they could receive a monthly income of approximately $500 for life. This predictable income can be a cornerstone of a retirement plan, covering essential expenses like housing and healthcare. However, it's important to weigh the benefits against potential downsides, such as fees and surrender charges, which can impact the overall value of the annuity2.