Annuities are usually sold by life insurance companies, but should not be confused with life insurance. An annuity program makes money management decisions easier, but should never be considered as your sole source of retirement income. You are guaranteed a fixed amount of income monthly, and assured that you will receive this amount for as long as you live. Purchasing power risk can be fairly high since the benefits of annuities are fixed. Investment risk depends on the stability of the company.
Annuities also have more than one form.
Some of the newer forms have additional advantages as investments under the Tax Reform Act of 1986. Mutual Funds . Mutual funds are investment companies that use the funds from investors to invest in other companies or investment alternatives. They have the advantage of professional management, diversification, convenience and special services such as check writing and telephone account service. It is generally easy to sell mutual fund shares although you run the risk of needing to sell and being forced to take the price offered.