June is National Annuity Awareness Month - NAFA
The following AI-assisted research is designed to provide an overview of the potential advantages and disadvantages of annuity ownership.
At McKnight, we don’t view annuities as a one-size-fits-all solution, but rather as one of many tools in our comprehensive financial toolbox. While annuities can be a valuable part of a broader investment strategy, they are not suitable for every investor.
It’s important to note that this overview does not cover every opportunity annuities may offer, nor does it list all potential drawbacks. If you have questions about your current annuities or are considering whether an annuity is right for you, we encourage you to contact us at 615-895-8574 or fs@mcknightadvisory.com.
At McKnight, our passion is helping clients obtain their greatest opportunity for success™—and in the right circumstances, annuities may play a meaningful role in that journey.
✅ Seven Times an Annuity Is the Right Fit
- You’re Worried About Outliving Your Money
- Annuities provide guaranteed lifetime income, which can be a powerful hedge against longevity risk [1].
- You Want Predictable, Stable Income
- Fixed annuities offer consistent payments, making them ideal for retirees who want to avoid market volatility [2].
- You’ve Maxed Out Other Retirement Accounts
- If you’ve already contributed the maximum to your 401(k) or IRA, annuities can be a supplemental tax-deferred savings vehicle [2].
- You Need to Bridge the Gap to Social Security or Pension
- Deferred annuities can provide income during early retirement years before other benefits kick in [1].
- You’re Looking for a Legacy Option
- Some annuities offer death benefits or can be structured to continue payments to a spouse or heirs [3].
- You Want to Protect Against Market Downturns
- Fixed indexed annuities offer growth potential tied to market indexes with downside protection [2].
- You Prefer a “Set It and Forget It” Strategy
- Once set up, annuities require little ongoing management, which appeals to those who want simplicity in retirement planning [3].
❌ Three Times an Annuity Isn’t the Right Fit
- You Need Liquidity or Flexibility
- Annuities often come with surrender charges and limited access to funds, especially in the early years [2].
- You Don’t Understand the Product
- Annuities can be complex, with varying fees, riders, and tax implications. If you’re not fully informed, it’s best to wait [3].
- You’re Under Age 59½ and May Need Early Access
- Early withdrawals can trigger penalties and taxes, making annuities a poor fit for younger investors with uncertain cash flow needs [2].
References
[1] Should You Add an Annuity to Your Retirement Portfolio?
[2] Morningstar’s Guide to Annuities
[3] Avoid These 7 Common Annuity Mistakes That Could Cost You Dearly
[4] NAIC Buyer’s Guide to Fixed Deferred Annuities