You put in a certain amount of money, which is invested in mutual funds. The company pays you a death benefit that's at least equal to what you put in. Plus, you get a guarantee of income over your lifetime or the chance to take it all out in a lump sum. The problem is I don't think everyone understands the contract and where it might fit into a person's financial picture. I'm talking about annuities held outside of qualified retirement plans.
Annuities are expensive.
That's my first issue. By comparison, you could invest your nest egg in any no-load mutual fund. That means you don't pay a sales charge to buy it. You would, however, pay marketing and administration expenses. The average for all domestic stock mutual funds is 1.42 percent per year, according to Morningstar, a fund researcher in Chicago.