Are Annuities Really as Useful as Advertised?

Core Insights - A study from the Center for Retirement Research at Boston College reveals that only 12% of investors with assets over $100,000 purchase annuities, while over 50% of those who could benefit from a simple annuity do not buy one due to the complexity of the process [1][2] Group 1: Annuity Understanding - An annuity is defined as an insurance contract that provides a stream of fixed payments in exchange for a paid premium, often seen as a way to stabilize retirement income [2] - Annuities come in various types, ranging from straightforward to complex options that include multiple investment choices, varying guarantees, and optional riders [2][3] Group 2: Benefits of Annuities - Simpler annuities can help even out income during retirement and offer protection against market volatility [3] - A single-premium annuity allows an investor to pay a lump sum upfront for guaranteed payments during retirement, regardless of economic conditions [3] Group 3: Drawbacks of Annuities - Basic annuities have drawbacks, including the sacrifice of potential investment gains and fixed payments that do not adjust for inflation, leading to erosion of purchasing power over time [4] - Investors may find it difficult or impossible to cancel the contract and withdraw unused principal without incurring additional costs [4]