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Advantages of an Annuity

  • You have a guaranteed regular income for the rest of your life.
  • It's tax paid.
  • It takes the pressure off you by having someone else look after your investments; you can now sit back and enjoy your retirement.
  • You may live a long time and make on the deal, at the expense of the insurance company.
  • You know for certain that your capital will last your entire life.

Disadvantages of an Annuity

  • If you die early, the insurance company gets to keep all the money, although it's possible to secure a guaranteed pay out period.
  • The annuity is not protected against inflation, although, again, it is possible to index link the annuity to offer some protection.
  • The tax paid status of the annuity may be disadvantageous if you're on a low marginal tax rate.