It depends.
Don’t let someone talk you into buying an annuity just because you have the money for it. Educate yourself on the pros and cons of annuities so you know what you are getting yourself into. There are plenty of sites that list the pros and cons of annuities, here are the top two pros and cons as I see it, the surrender period and tax consequences.
(1) Surrender period. The surrender period is how long you have to wait before you can access your money again without incurring a penalty. A good company, make sure you select a quality company, will use the longer period to grow your money better, that’s a good thing (pro). However, if you elect to withdraw the money during the surrender period you can pay a high penalty and lose any gains you might have had coming, that’s the tradeoff (con).
Make sure you understand the surrender period and have enough other monies available in case of unexpected needs during the surrender period.
(2) Tax consequences. An annuity allows you to defer taxes to age 59 ½ . As long as you leave the money in the annuity you won’t have to pay taxes on your gains until age 59 ½ or later. Deferring the taxes can be a great advantage (pro) assuming you have planned accordingly. The trade off is that money taken out of the annuity before 59 ½ incurs a tax penalty of 10% (con). Plan wisely. There are many nuances to these two points so study wisely, don’t let someone talk you into buying an annuity just because you have the money.
An annuity is not a bad thing it just needs to be understood and used at the right time for the right purposes. Be a good steward of your finances and do the work necessary to understand them
