June is National Annuity Awareness Month, a perfect time to dive into retirement planning. With the current economic concerns like market volatility and rising interest rates, it's essential to consider financial products that offer stability. Annuities can be your anchor in these unpredictable times.

What is an Annuity?

An annuity is a financial product offered by insurance companies where you pay a lump sum or series of payments in exchange for regular income in the future. This income can last for a set period or be guaranteed for life.

Why Consider an Annuity?

Annuities provide several key benefits:

• Lifetime income and legacy planning features, such as death benefits, ensure financial security for you and your heirs.
• They offer tax-deferred growth, allowing your investment to compound over time—a crucial aspect known as the 'triple tax benefit.'
• They provide market protection through certain types designed to shield you from downturns.

Are More People Choosing Annuities?

The appeal of annuities is reflected in their growing popularity. In 2024, annuity sales hit a record $432.4 billion, up 12% from 2023. Although projections for 2025 are more moderate, annuities will continue to play a crucial role in diversification strategies.

What Are the Downsides of Annuities?

It’s important to consider potential downsides:

• High fees, such as sales charges, administrative fees, and investment management costs, can eat into your returns.
• Risks like rising interest rates and inflation can impact their value, alongside the potential failure of insurers. However, protections like state guaranty associations are available.
• Early withdrawal can result in penalties, including ordinary income tax and surrender charges.

Annuities aren't a one-size-fits-all solution but can be a significant tool in your retirement strategy. For personalized advice, discuss with a financial professional how annuities might fit into your broader financial plan.