What Are The Disadvantages Of Annuities? 
Knowing the disadvantages of all financial assets is a good idea , so good for you to check ! All financial assets have their issues . The key to financial success is to determine which ones fit your financial situation the best and how to assemble an overall mix of assets that serves you best . Annuities often have a place in a portfolio even with their limitations . You would think your question would be easy to answer . The true , but maybe not too satisfying answer is , it depends on how it is used . Annuities are a tool and when used well they can yield excellent results . If used poorly they can be hazardous to your financial health . This is a deep topic so I will just list a few things to look out for to determine if an annuity is appropriate for you . I would advise you to ask your friends for a referral to a reputable insurance professional . And I would look to your CPA or tax advisor to advise you on the tax implications of owning an annuity . This is best done in a joint meeting of both the insurance professional and the tax advisor . Are you under 59 and 1/2 and subject to the IRS 10 % early withdrawal penalty How liquid is the annuity ? How long do the early withdrawal penalties work and how much will they let you take out annually without penalty ? Can you afford to defer your gains and let them grow past the penalty periods ? Is there a market value adjustment cost in addition to the early withdrawal penalty ? How is the interest rate calculated ? How long are current rates locked in ? Will the credited interest rate go up with rising interest rates ? How financially strong is the insurance company you are looking at ? Are you confident they will be able to deliver on their contractual promises ? What are their independent ratings ? Annuities require ongoing attention . Are you willing to meet with your advisors periodically to manage them ? These and many other factors should be considered in determining if an annuity is appropriate for you . Competent professionals use annuities to provide safe income , growth and tax benefits . They are useful in many situations . Be mindful that they are only one of many tools a financial professional may use in helping their clients ' meet their financial goals . 