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Annuity: 15 Things You Need to Know Now About Annuities

An annuity can provide lifetime income, but there’s more to how an annuity works than meets the eye.

WITH THE RETIREMENT playing field littered with crushed investments and dreams, the safety of guaranteed income streams looks more attractive each day. Some annuities can provide such a guarantee.

If you ask an insurance company to define annuities, the marketing phrase the insurer will probably use is: “Annuities can produce an income stream you can’t outlive.” That can be true. Annuity payments can last for as long as you live – or even longer – because the payments are based on your life expectancy.

On the surface this sounds great, but annuities are among the most commonly misunderstood and misused financial products. “If you say the word ‘annuity,’ what do you mean? There’s so many different types,” says Stan Haithcock, also known as Stan The Annuity Man. “Saying you hate annuities is like saying you hate all restaurants.”

The trouble is annuities are often sold and not bought. Consumers are pushed into ill-fitting products because that’s what the broker is selling that month. It’s important to be an educated consumer when you shop for an annuity, so let’s look at what annuities are, how they work, and whether they make sense for you.

(LINKS TO MONEY/USNEWS.COM)

Here are 15 things you need to know about annuities: