Without being a Financial Advisor, we still have a general idea about bonds vs. stocks, mutual funds vs. commodities. But when it comes to annuities, most people are still “clueless.” A recent study of seniors, from the American College of Financial Services, shows most of us don’t even know the basics.

On a short quiz testing knowledge of annuities, older Americans scored just 12 percent out of a possible 100. In fact, this “Retirement Income Literacy Study” (quiz) measured a variety of areas of knowledge, just just anunities. Yet, knowledge of annuities ranked very last. Respondents knew far more about complicated topics like Medicare, life insurance, and long-term care than annuities

Stands to reason, that many of us steer clear of things we don’t understand. So, it’s no surprise that some analysts say many people don’t buy annuities because they don’t understand them.


Annuities 101: An annuity is “a series of fixed, predictable payments made at regular intervals over multiple years.” You can purchase an annuity yourself or you can acquire one through work. Many of us actually have annuities, and don’t even know it:

·        A pension is an annuity an employer pays to a retired worker.

·        Social Security is an annuity the government pays to you.

When it comes to our own personal investing, research indicates only about 10 percent of Americans own commercial annuities. Another trend shows annuity owners tend to be upper middle class (and likely to live longer than their counterparts). The great majority of seniors don’t consider the possible benefits of annuities in their portfolio. They subsist on an average monthly Social Security benefit around $1,900 as of January 2024, in addition to their own nest egg and pension, even though the average household run by someone age 65 or older spends over $4,300 per month.


Every financial instrument has its pros and cons, making it very useful for certain outcomes and less desirable for others. Annuities are the same, however their positives are often clouded in mystery. Let’s blow away some of the fog, and delve into the benefits of incorporating annuities into a retirement plan include:

  • An annuity further diversifies your overall portfolio. Becuase annuities are not investments, their “built-in safety” can add greater security to your portfolio.
  • Annuities don’t have the same contribution limits that 401ks and IRAs do. You can put more savings away through an annuity, when you’re maxing out traditional retirement plan savings.
  • Purchasing a deferred annuity, defers your taxes until you begin making withdrawals. This includes interest earned on the annuity, making it an effective savings vehicle.
  • Generally, annuities do not go through probate when they’re transferred to a beneficiary. So, choosing an annuity with a death benefit rider can allow you to smoothly pass the annuity to your named beneficiary without the logistics of validation, administration and additional fees.

Particularly in a season economic turbulence, this instrument is becomine a more attractive option. Although no financial instrument can boast all 3 characteristics of an “Ideal Investment”: safety, liquidity, and returns. Annuities are a solid instrument to deliver security with good growth potential. Consider if they might be an option to bolster your Retirement Plan.

Do you need an expert second opinion? SCHEDULE A CONSULT

SOURCES : Annuities are key to retirement. So why are so few of us buying them? | Annuities for High-Net-Worth Individuals

This content is provided for informational purposes. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. None of the information contained herein shall constitute an offer to sell or solicit any offer to buy a security. Individuals are encouraged to consult with a qualified professional before making any decisions about their personal situation.