The insurance companies that create annuities often make them seem like investments. But really they’re more like insurance.
At their simplest, annuities offer a guarantee. If you turn over some money, you’ll be guaranteed to get all that money back — plus usually a certain amount more. Or you turn over some money and you’ll be guaranteed a regular check for a certain period.
Like insurance to stave off financial disaster, an annuity is something you purchase to guarantee that you won’t run out of money if you live a long time. Such financial guarantees are attractive. After all, we don’t know how our investments will perform: This year may be the first in a while that your stock and bond index funds both lose money.
Still, annuities are not a mainstream product. This is partly the fault of the annuity companies, since they have long outsourced the sales process to people who do not always have customers’ best interests at heart.
Read the full article at NYTimes.com.