Are Annuities a Good Investment?

It depends on the type and your goals. Here is an honest look at who annuities fit — and who they do not.

What an annuity actually is

Unlike a stock or mutual fund, an annuity is a contract with an insurance company. You are buying guarantees — protection from market losses and, often, income you cannot outlive. Judging it purely on "return" misses the point; its job is certainty, not chasing the highest possible gain.

When an annuity is a good fit

• You are near or in retirement and want a paycheck that lasts for life.
• You want part of your savings protected from a market crash.
• You value predictable income over the highest possible return.
• You are worried about outliving your money.

When it is probably not a good fit

• You may need the money in full in the near term (surrender periods limit access).
• You are young with a long horizon and are comfortable with full market risk.
• You want to maximize growth and do not need guarantees.

The honest bottom line

"Are annuities a good investment?" is really two questions: is this type of annuity sound, and does it fit your goals? A well-chosen fixed indexed annuity from a strong insurer can be an excellent tool for protected, lifelong income — for the right person. The only way to know if that is you is a quick, honest conversation.