Annuities have a number of key benefits. First, they offer control. Like an IRA, you’ll have complete freedom to choose the annuity you want, the risk level it provides, and also the kind of benefits it offers.
The payouts from an annuity can last a lifetime or a lifetime plus the lifetime of a spouse. They can even be inheritable. They can provide a fixed income like a pension, giving a retiree a stable foundation to their post-work life. Or they can be variable, allowing income to change with the performance of the stock and bond markets.
It’s also possible to buy an annuity just before you retire. Instead of putting money aside each month, you can turn a lump sum into a revenue stream. That provides a useful solution for people who have saved money but haven’t been funding their retirement account.
On the downside, annuities can be relatively expensive, with high administration fees.
Like IRAs and 401(k) plans, annuities also come in a number of different forms.