In and of themselves, annuities just like any other investment are not technically good or bad. An annuity can, however, be considered appropriate or inappropriate for particular situation.
There is a wide variety of annuity types to choose from, each with its own special features and benefits as well as pros and cons as to why they would or would not suit the specific goals of an individual.
For example, fixed annuities pay a set amount of interest every year, while variable annuities# pay a fluctuating, or variable, rate based on the performance of the underlying investments. There are also several variations of annuities that combine some characteristics of both fixed and variable annuities#.
Certainly, one of the most popular reasons that people use annuities is to provide income in retirement. In fact, annuities may be referred to as “financial vehicles” that can offer an income that cannot be outlived (although this can be an incorrect stereotype depending upon the type of annuity or optional income payout that is chosen).
In any case, when an individual funds an annuity contract from an insurance company, he or she can feel secure in knowing that he or she will receive an income for life or at least the period of time chosen and specified.