In this low-yield market, it’s easy to be thrown off your game. You know money markets are paying nothing, and your dollars are rotting away via inflation. So when you read or hear about annuities guaranteeing 6% or 8%, it’s hard not to listen up.
Well, that’s a mistake. Do not buy variable annuities and the promises they make. Once you venture down this road, you’re likely to end up with an expensive product you shouldn’t own. It’s hard to resist the bells and whistles like inflation protection. But that and other add-ons tack on costs well beyond what you may have bargained for prior to making the phone call to your broker.
Here’s a rule of thumb: If it sounds too good to be true, then it is. There are ways to invest successfully in this market for yield without buying an annuity. You’d be smart to do your homework before getting stuck with one of these.