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A fixed sum of money paid to someone each year, typically for the rest of their life.
An annuity can provide lifetime income, but there’s more to how an annuity work than meets the eye:
Annuities are an appealing option for investors because they provide guaranteed income for the rest of your life.
With the retirement playing field littered with crushed investments and dreams, the safety of guaranteed income streams looks more attractive each day. Some annuities can provide such a guarantee.
If you ask an insurance company to define annuities, the marketing phrase the insurer will probably use is: “Annuities can produce an income stream you can’t outlive.” That can be true. Annuity payments can last for as long as you live – or even longer - because the payments are based on your life expectancy.
On the surface this sounds great, but annuities are among the most commonly misunderstood and misused financial products. “If you say the word “annuity,” what do you mean? There’s so many different types.” Saying you hate annuities is like saying you hate all restaurants.”
The trouble is annuities are often sold and not bought. Consumers are pushed into illfitting products because that’s what the broker is selling that month. It’s important to be an educated consumer when you shop for an annuity, so let’s talk about what annuities are, how they work, and whether they make sense for you.