By Dez Duran-Lamanilao

People usually purchase annuities, contracts requiring insurers to pay annuitants either right away or in the future. The three basic types of annuities are fixed (with a minimum rate of interest and a fixed amount of periodic payments), variable (owner can direct payments to various investment options), and indexed (features of securities and insurance products combined).

What can you gain from buying annuities? The key benefits of annuities are the following:

  • Periodic payments for a specific amount of time
  • Death benefits
  • Tax-deferred growth
  • No annual contribution limit
  • Guaranteed payouts
  • Protection from probate and creditors
  • Exemption from the Free Application Of Student Aid (FAFSA) asset status

While the advantages may be attractive, consider first important factors such as  their costs and fees, complexities, the taxes associated with them, and withdrawal and distribution penalties before you decide to purchase them.

Additionally, keep the following things in mind when buying annuities:

  1. Understand your annuity contract very well.
  2. Search for other retirement income options and compare accordingly.
  3. Consider buying a variable annuity only if its features make good sense.
  4. Be mindful of the charge that you will incur if you sell or withdraw money from a variable annuity too soon after buying it.
  5. Consider a deferred annuity if you would rather not start paying immediately.
  6. Transact with companies that have already established their position or are considered as highly rated insurers.


The best times to buy annuities are when you do not need liquidity, a direct guarantee of principal appeals to you, when you want a guaranteed income, and when you want to be protected from long-term care expenses.

If everything seems complicated and you are having difficulty deciding, experts at New Horizon commit to simplify the protection that matters to you while taking care of your needs as well as your expectations.