American founding father Benjamin Franklin once famously said there were two certainties in life: death and taxes. But he overlooked a third — financial sales reps pushing complex investment products for juicy commissions. One of those products is annuities — which appeal to retirees seeking steady payments to hedge against market downturns.

As interest rates climbed, so did rates on annuities — making them more appetizing for investors who aren’t sure whether to buy stocks at record highs or bonds. And if you’re 5-10 years away from retirement, this could be one of the most opportune times to take advantage of annuities.

A-new(ity) record: Annuities are insurance contracts investing in both stocks and bonds. Investors pay monthly or one-time premiums in exchange for regular income streams. But many people view annuities in a bad light given the complex nature of the investments, high fees, and the pushy nature of sales reps from the high commissions they receive on these products. However, this perception is changing with the introduction of simplified, commission-free products.

• High rates have fueled a surge in demand, with US annuity sales rising 23% to hit a record $385B ****in 2023 — marking its second consecutive year of record-breaking sales.
• Guaranteed annuity rates, which offer minimum returns, are the highest since 2011 — with rates nearing 6%.

But beware of sales tactics…

While annuities might suit older Americans looking for guaranteed returns and lifetime income, there are still risks to consider. Despite regulations mandating that annuity sellers act in clients’ best interests and disclose conflicts of interest in 44 states, pitfalls remain:

• Potential for missed gains: Safety comes with a cost, as annuities are designed to help you preserve your investment, not beat the market.
• Fees, fees, fees: Many annuities carry hidden commissions and investment management fees — and exiting your annuity before the end of the term will also generally come with a fee.

Worth the hour-long sales pitch? Annuities can supplement and guarantee retirement income but can also lose value and confuse investors. With so many variations of annuities available, it’s wise to consult a financial planner or expert and not just a daily newsletter… despite how much you trust us.