Low Payouts on Annuities May Give Investors Pause
February 16, 2010
Although the Obama administration recently gave its stamp of approval on annuities as a solution for retirement income, many professionals warn that their low yields and increasing fees should give investors pause, The Wall Street Journal reports.
Rather, some financial advisers say it might make sense for a retiree to buy annuities in staggered stages, since the rate they pay is locked up and could possibly increase in the years ahead.
In addition, bonds pay yields each year and then return the initial payment after the term, whereas once an investor buys an annuity from a carrier, the money you kicked in is gone forever, and should the investor die prematurely, it’s an especially bad deal.
Advisers are also warning that low interest rates and high market volatility are making it more expensive for providers of annuities, stable-value funds and other products offering income guarantees to construct portfolios.
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