The 7 Drawbacks to Fixed Annuity Products
June 29, 2021 by Harry N. Stout
Today’s fixed annuity products possess great intrinsic value (e.g., tax deferral, guaranteed income options, probate avoidance and others), but they come with drawbacks that a buyer must understand before committing their hard-earned cash.
In my view the drawbacks are not deal breakers but must be carefully considered by the buyer before the products are purchased.
The key fixed annuity product drawbacks are:
1. Interest Rates That Can Change Each Year
Most fixed annuity contracts (except for multiple year annuity products, where the interest rate is guaranteed for the entire surrender charge period) allow the issuing life insurer to set a new interest rate each year or period of years. This means that the interest rate the consumer receives can change during the surrender charge period. This is an implicit risk the consumer is taking when buying most fixed annuity contracts.
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