Immediate Annuities: Benefits & Potential Drawbacks

If you are considering purchasing an annuity, immediate annuities can provide you with some benefits. However, these annuities will also carry with them a few burdens.

Lack of Diversification

Whenever you put a large amount of your retirement dollars into an immediate annuity, you are going to have to give up diversification. By doing this, you are potentially going to create an extra sense of worry and stress for yourself. No longer will you feel diversified with your portfolio and have a feeling that everything will be fine. Instead, you are going to put all of your eggs into one basket and bet on one individual insurance company. If the company goes under, your retirement dollars are gone in most cases.

Takes Away Options

With most investments, you will always have the option of getting your money out and putting it into something else. If you change your mind or if the investment is not performing up to your standards, you can simply cash it out and move on. However, with an immediate annuity, this is not going to be an option. You cannot get any refunds and your money is going to be tied up until the annuity term is over or until you pass away.