As retirement approaches, many individuals are faced with the decision of how to manage their retirement savings. One option that may often be presented is investing in an annuity. Annuities are insurance products that provide a guaranteed stream of income in retirement. They have been marketed as a long-term investment solution for retirees, offering the benefits of tax-deferred growth and a steady source of income to supplement Social Security and pension payments.

On the pro side, annuities do provide that guaranteed income stream, which can be reassuring for retirees who want to ensure a steady source of income for the rest of their lives. For those who live longer than expected, an annuity can also provide protection against outliving their savings. Additionally, annuities offer tax advantages, as the earnings are not taxed until they are withdrawn, allowing for more growth potential. However, there are also cons to consider. Annuities can be complex and come with fees and surrender charges, making them less transparent and potentially eating into the overall return. Annuities also have lower returns compared to other investment options, limiting the potential for growth. It’s important for retirees to carefully weigh the pros and cons and consult with a financial advisor before deciding if an annuity is the right choice for their retirement plan.