Annuities Explained: The Choices And Red Flags

Listen to the Story: Morning Edition
by NPR STAFF

March 20, 2013 3:06 AM ET

Companies are licking their chops at the prospect of a wave of baby boomers leaving their jobs with trillions of dollars in 401(k)s and other savings accounts, so older Americans may find themselves bombarded with ads for annuities. And younger boomers, too, may be targeted, since many are helping their parentswith investment decisions.

Annuities are a $200-billion-a-year business for life insurance companies and financial institutions that sell them. They are a sort of private pension that people can buy for themselves to create regular income for after they retire. They are tax-deferred mutual-fund-like investments, there are no annual contribution limits, contributions can be made in a lump sum or over time, and the payouts can be immediate or deferred.

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