Advantages and Disadvantages of the Term Certain Annuity

A term certain annuity is an investment that many choose to purchase upon retirement. This type of investment carries with it some pros and cons. Here are the advantages and disadvantages of the term certain annuity.

Advantages

The main advantage that comes with the term certain annuity is that it can provide you with a stable income during your retirement years. With this investment, you pay a certain amount of money over time or in a lump sum. At that point, the annuity will provide you with a monthly payment. This can be a great way to produce a predictable income for yourself over a long period of time.

Another advantage of this type of investment is that it is an insurance product. Therefore, you can work directly with your insurance company to secure the term certain annuity. You will not have to open a special investment account or find a financial broker. This makes the process much easier and faster in most cases. Even after you set up the annuity, the process is very straightforward. You receive your monthly payment and a statement that explains the entire process. This means that anyone could potentially invest in an annuity without any issues.

This investment is also very secure. Compared to other types of investments, it is one of the most stable and predictable investments around. You will not have to worry about how the investment is performing on a regular basis. You can count on the income coming in every single month without any worries. This makes it a very preferable form of investment for retirees who want to ensure their standard of living.

Disadvantages

One of the big disadvantages of the term certain annuity is that you will receive money only for a given period of time. For example, you might by a term certain annuity that will pay you for the next 20 years. However, if you live longer than the term, you will not have any money coming in. At that point, you might be too old to work or generate any other income. This could be a very troubling proposition for many. 

Another disadvantage that you will need to consider is the loss of control over your money. When you invest in a term certain annuity, you are basically giving your retirement dollars to someone else to manage. You are counting on them to invest the money and send you a regular check. Many people prefer to have complete control over their retirement dollars and manage their own investments. If you are the type of person who prefers to choose your own investments and oversee your portfolio, the term certain annuity may not be for you.

Another drawback to this type of investment is that you will have to pay fees in most cases. Some term certain annuities will charge you a front-end load, while others charge you on the back end. Other annuities will have charges that you must pay throughout the term.

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