6 Reasons for Saying No to an Annuity - Some Good and Some Not-So-Good

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3 Excellent Reasons for Saying "No" to an Immediate Annuity

1. "My income needs are already covered. I just don’t need more income."

One of the first steps in retirement planning is calculating how much income you can count on throughout your retirement years. For some, Social Security, pensions, and other income sources may be more than adequate to cover their retirement expenses. For these individuals, savings may be best placed in a well-balanced portfolio of stocks, bonds, and other investments.

Just bought my first SMA and was very happy to have gone through Immediate Annuities.com. I found them in an article in the Wall Street Journal. As a first time buyer, I had a lot of questions. But to their credit, they did a great job answering my questions directly or getting the right answers from the right people when they needed to.

Allen Boaman

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If you’re not sure whether your income sources will cover your expenses, use our retirement income calculator to find out.

2. "My nest egg is very large. I’ll live off of dividends and stock market gains."

Remember, an immediate annuity is designed to guarantee lifelong income. If you have managed to put aside enough savings in your lifetime to keep you afloat no matter what, then you probably don’t need an annuity. This is true for very few people, however.

This is where financial planning is key. Even if you are pleased with your level of savings, will it keep you afloat and living comfortably if you live to 90? Or 95? What if you or a spouse needed special medical care? What we don’t want is to discover we need more income when we’ve reached an age where our ability to bring in new income is much lower or even nonexistent.

3. "I’ve heard it all, and I’m just not convinced an annuity is right for me."

If this is you, don’t buy one. It is impossible to get out of an immediate annuity once it’s been established (past the "free look" period).

Your goal above all else is to be able to sleep well at night, sure that you’ve made a sound retirement planning decision. For this reason, it doesn’t make sense to commit to an annuity if you have gnawing doubts about its value.

A final suggestion: If you decide an immediate annuity is right for you, you may want to start gradually, creating an "annuity ladder." With an annuity ladder you invest your premium across different insurance companies over a period of years, to avoid the risk of investing all your premium when interest rates are low.