Q. Why annuities are expensive?
A. Annuity has a reputation as an expensive product, because indeed many (although not all) of annuity products are very expensive. These expensive annuities paint the entire annuity category as expensive. There are two main reasons why those annuities are expensive.
1. Distribution Cost
Most annuities pay high commissions.
2. Guarantees
You don't want to lose your money? Sure, annuity can promise that, but you will pay for it.
Which annuity is less expensive? You can consider immediate annuity (meaning the payout will be immediate, rather than waiting a few years and let your money grow inside the annuity account), as immediate annuity tends to be less burdened by costs. Here in exchange for a lifetime payment, you give up the chance to leave something to your beneficiaries.
A. Annuity has a reputation as an expensive product, because indeed many (although not all) of annuity products are very expensive. These expensive annuities paint the entire annuity category as expensive. There are two main reasons why those annuities are expensive.
1. Distribution Cost
Most annuities pay high commissions.
2. Guarantees
You don't want to lose your money? Sure, annuity can promise that, but you will pay for it.
Which annuity is less expensive? You can consider immediate annuity (meaning the payout will be immediate, rather than waiting a few years and let your money grow inside the annuity account), as immediate annuity tends to be less burdened by costs. Here in exchange for a lifetime payment, you give up the chance to leave something to your beneficiaries.
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