What Are the Pros and Cons of an Annuity?
By: Kevin Hagen An annuity is an investment alternative that can provide you with guaranteed monthly payments during your retirement years. You invest a certain amount of money with an insurance company or other financial institution, and in return you receive monthly payments for a specified term or the rest of your life, based on the investments the annuity company makes with your money. You can make a lump sum payment to set up the annuity plan, such as when you receive an inheritance or take a lump sum payment from your 401(k) or other retirement account. Or, you can set up an annuity account in anticipation of your retirement and contribute to the account over an extended period of time to build up the balance on which your annuity payments will be based. Types of Annuities The two basic types of annuities are immediate and deferred. With an immediate annuity, you make a lump sum payment now and start receiving monthly annuity payments immediately. With a deferred annuity, you eit
