6 Reasons for Saying No to an Annuity - Some Good and Some Not-So-Good
3 Excellent Reasons for Saying "No" to an Immediate Annuity
1. "My income needs are already covered. I just don’t need more income."
One of the first steps in retirement planning is calculating how much income you can count on throughout your retirement years. For some, Social Security, pensions, and other income sources may be more than adequate to cover their retirement expenses. For these individuals, savings may be best placed in a well-balanced portfolio of stocks, bonds, and other investments.
We had heard about annuities and were investigating them for our IRAs. We also heard bad things about pushy brokers over the years. So when we went to the ImmediateAnnuities.com site we were skeptical about calling them. But whenever we called their staff was really friendly. They answered all our questions and one of their reps even told us that at our ages there was no advantage to buying the annuity with our IRAs. These guys are really honest!
If you’re not sure whether your income sources will cover your expenses, use our retirement income calculator to find out.
2. "My nest egg is very large. I’ll live off of dividends and stock market gains."
Remember, an immediate annuity is designed to guarantee lifelong income. If you have managed to put aside enough savings in your lifetime to keep you afloat no matter what, then you probably don’t need an annuity. This is true for very few people, however.
This is where financial planning is key. Even if you are pleased with your level of savings, will it keep you afloat and living comfortably if you live to 90? Or 95? What if you or a spouse needed special medical care? What we don’t want is to discover we need more income when we’ve reached an age where our ability to bring in new income is much lower or even nonexistent.
3. "I’ve heard it all, and I’m just not convinced an annuity is right for me."
If this is you, don’t buy one. It is impossible to get out of an immediate annuity once it’s been established (past the "free look" period).
Your goal above all else is to be able to sleep well at night, sure that you’ve made a sound retirement planning decision. For this reason, it doesn’t make sense to commit to an annuity if you have gnawing doubts about its value.
A final suggestion: If you decide an immediate annuity is right for you, you may want to start gradually, creating an "annuity ladder." With an annuity ladder you invest your premium across different insurance companies over a period of years, to avoid the risk of investing all your premium when interest rates are low.
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