Teachers are smart people. But as smart as they are, it's impossible to be an expert on everything - including investing for retirement. It is my hope that, by reading this article, teachers will be more cognizant of the pros and cons of annuities and other investment options available to them. Let's start with a description of fixed annuities. Fixed annuities are an insurance contract designed solely for retirement savings where investors are guaranteed a stated rate of return over a period of time.
Variable annuities are also insurance contracts designed for retirement savings.
That type of security is a good thing. The downside of annuity products is that you, the investor, actually appropriate a portion of your retirement savings to pay for that insurance policy which guarantees the death benefit. This lowers the amount of actual investable dollars working for you in your retirement plan. Another detriment to annuities is that most come with a surrender period. This means that you must keep your money locked into that annuity for a period designated by the contract, typically 6-8 years, before you may remove it without a penalties assessed by the insurance company, itself.