Annuities: Why You Shouldn't Take The Big Payout BestCashCow.com (blog)
I was definitely surprised to hear about the comeback of annuities, so when I started taking a harder look at them, I found definite possibilities for investors to consider, along with some serious dangers.
Annuities, in case you don't know, are basically incomes that you purchase from insurance companies. You hand over a big wad of cash in the beginning, and the insurance company pays you a fixed stable amount for the rest of your life.
For instance, the company Presidential Life offers a lifelong immediate annuity that costs you three hundred grand up front, but will pay out just under two grand a month for the rest of your life. That means, in about fifteen years or so, you'll start making a profit on the annuity while getting a regular consistent income that isn't affected by interest rate fluctuations like CDs and bonds.
But there's a risk--that same company, Presidential Life, has a rating from AM Best, a consulting firm that rates insurance companies, of a B+. This may not SOUND bad, but considering that the top rating is A++, a B+ suddenly looks like an F. Especially if it's YOUR three hundred grand you just dropped with them.
