I've been told that deferred annuities often impose high fees and tend to be poor investments. Who might benefit from buying one of these?
Fees associated with deferred annuities can be high. The front-end cost, and any annual fees, must be weighed against the long-term benefit of the annuity. Typically, deferred annuities do not require that you pay taxes on accumulated income until you take the money out of the annuity. If you are trying to minimize taxes, a deferred annuity might be to your advantage. If you want a guaranteed income after retirement, or if you want to provide a guaranteed income for a loved one, the feeling of safety and assurance might be considered against the costs associated with buying the annuity.
Michael W. Butler, PhD, Professor of Economics, Angelo State University, San Angelo, Texas
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