Annuity? Why not?

I'm getting ready to retire in a couple of months. I don't want any risk and so I'm prepared to put my retirement money into an annuity rather than a cd, money market, stocks, bonds, or mutual funds. People keep telling me not to do this. What's the problem? I really don't want any risk whatsoever.

If you're a soon to be retiree and you're looking to lock in a stream of income with next to no risk, a fixed annuity is the right answer.

People automatically think of variable annuities when you say annuity, and those can sometimes have high management fees. Also, people may tell you that you can manufacture a stream of income greater than the annuity by investing the money yourself, but if you're looking for safety and convenience, a fixed annuity or some variant of a fixed annuity is going to be the best bet.

My mother is already retired at 55. However, her portfolio still has a good mixture of stocks and bonds.

Is this risky? Not exactly.

It's important to understand the word "risk." When brokers use this term, they usually mean a portfolio has the possibility of fluctuating in value, and the possibility of posting negative returns.

However, in the long run--and I imagine you plan on living for at least another 20 yrs. (fingers crossed!)--stocks and bonds have ALWAYS posted higher returns than an annuity. Much higher returns, in fact. Probably twice as much, or more.

If you're very short on cash, have a small account, and really need an immediate stream of income, then yes, consider the annuity.

But by all means, if you have adequate means of income for the moment, consider investing in some conservative mutual funds. I highly doubt you would be disappointed.

My best recommendation would be to visit a financial planner. It's worth the money, and he could probably explain your options better than I have here.

Go with the math, not your feelings!

Hope this helps,

Steven L.

I own 2 annuities through a bank using Hartford. Paying 7% and you get the full amount back in 17 years. Immediate annuity.