For many years annuities have received a bad rap from celebrities such as Suzie Orman, Dave Ramsey and many more. When it comes to planning for your retirement, you probably hear a lot of comments from friends and family alike, giving their two cents about different financial investments. Sadly, many people tend to downplay annuities and their importance as a safe and secure income-generating retirement plan. Let’s look at some common myths about annuities.

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Myth #1: Annuities are a bad investment

Because they earn a lower interest, many people think they are not a good investment. However, factor in safety. If you meet other advice such as maxing our your 401K contributions and having emergency savings, an annuity is a safe way to protect your money and set up an income for life.

Myth #2: Annuities are all the same

There are many different annuity funds run by many different insurance companies and financial institutions. Don’t think they are all the same. Learn about every single option before choosing from more than one place.

Myth #3: Annuity fees are too high

Many people say that the fees are too high, but again, this is due to the safety factor. The fees will not take away from your lifetime income, and if you live longer than expected, you could end up collecting more than your investment. Their are surrender fees on annuities, if you withdraw more than the contract allows or surrender the policy in whole.

Myth #4: Annuities don’t offer my spouse protection:

You can leave most annuity types to a spouse, child, a loved one or a charity. It depends on the type you buy. If you want to provide a lifetime income or a lump sum payment to your beneficiary, tell your financial planner or insurance agent what you are looking for. Companies offer various income payment options: Life Only, Life Annuity with Period Certain, Joint and Survivor. Some annuity contracts may pay a death benefit to your beneficiary if you die before income payments start.

Myth #5: You can’t access the money in an emergency

While there are limitations, fees, and penalties for withdrawing money early, these are lowered to be more reasonable after the contract terms – usually five to ten years from purchase. During the surrender period, many annuities have several withdrawal options if you need access to your funds; interest only, 10% free withdrawal, if you were to become terminally ill, or went into a long term care facility. When researching your options, make sure to discuss your withdrawal options with your annuity specialist.

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Myth #6: Deferred annuities are a waste

You may feel odd about stashing money into a deferred annuity while waiting to retire, but this is a good way to keep your money safe from market downturns. If you have money left from other investments or you come into money well before retirement, it’s not a waste. It’s safe.

Myth #7: Immediate annuities are too risky

Most people buy an immediate annuity because they are over 65 years old, came into a large sum of cash, have maxed out other contributions, or are trying to defer taxes until later during retirement. An immediate annuity can protect your cash value from taxes today, and you’ll only pay taxes on your monthly payments as ordinary income. Hardly risky.

Myth #8: There are better ways to create a lifetime income

There may be, but there are few ways that you can do this with less money. For example, if you invested $1,000,000 dollars into an immediate annuity today, you will collect about $65,000 a year fro life and be able to leave some to your spouse too. If you kept that money, you might blow it or lose it in another way.

The best thing to do is to speak with an annuity specialist who can advise you on all the different annuities and their features in your market.