So, for instance, if you have $100,000 in the annuity and you get a 5 percent rate, you'll get $5,000 of retirement income each year going forward -- even if you live longer than 20 years.
Consumers, though, haven't been too enthusiastic about the investment option. The concern has been that if you put, say, $100,000 into one of the accounts and die before it's paid back to you, your heirs may get nothing. If you live a particularly long time, though, you could get back more than your original investment.
Other plans lock you in -- not allowing you to withdraw your money prior to retirement, even in the event of a financial crisis.
advertisementIn general, financial advisers, such as Jim Holtzman, a CFP and CPA with Legend Financial Advisors in Pittsburgh, aren't exactly anti-annuity. They do say, however, that the amount people should invest in a lifetime income option account comes down to spending needs. The payout should be enough to cover your projected monthly living expenses. Beyond that, other investment vehicles should be considered.
"It's complicated, but you have to structure a portfolio that makes sense for the client," he says. "Part of the reason this (debate) is coming up is pensions have (basically) gone away. Also, in the last 20 years, we've had two bubbles burst in the market. That's going to cause concern for a lot of people who were approaching retirement."?
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