They are only backed by the ability of the issuing insurance company’s ability to pay. This is important to note so I will say it one more time. It is important to look at the issuer of the annuity first because annuities are NOT a guaranteed investment of any sort. Annuities should never, I repeat never, be the large majority of your portfolio because of their lack of liquidity which is one of their biggest drawbacks. While many investment professionals hate annuities, I do not believe that they are all bad and some of them can make sense as a small part of your investment portfolio. I’ve met with hundreds of company CEOs and CFOs, including Steve Jobs and Richard Branson, and I will use my analytical skills to break down these complex instruments into something easier to understand. I hope to bring a unique perspective to this topic drawing on my years of experience analyzing companies as a research analyst. I am totally impartial as I am a fee-only registered investment advisor. I am writing this blog from the perspective as a curious analyst. Stiff surrender penalties can’t be avoided for many years after you sign on the dotted line. I have dealt with too many clients that have come to me asking for help getting out of an annuity and I can’t help after the fact. It is of the utmost importance to make an informed decision. More importantly, annuities have grown into extremely complex instruments which even the most seasoned professional may have trouble deciphering. Most of the information comes from the companies that sell the annuities and they gloss over the fees, risks and downsides. This is exactly why I will go in depth into some of the most popular annuities because there is shockingly little information available about them. You will often hear that annuities are sold, not bought.
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