Nothing, however, comes without costs. The price one pays for the advantages of annuities is giving up liquidity for an extended period of time, usually ten years. Annuities should best be used as part of a diversified portfolio that provides a lot of liquidity from other investments.
Contrast this with buying stocks directly: Common stock gives one a lot of potential upside, but also a lot of downside, including losing a lot or even most of your money overnight. You can sell out and get cash at any time, however. Buying an annuity can give you a similar upside while removing the downside in the long run. The cost of such protection, however, is to give up the ability to withdraw all of your money before the surrender charge period (e.g. 10 years) is over.
Here is an article I saw this morning about an elderly Pennsylvania woman who put too much of her money into annuities without being fully aware of that she was tying up that portion of her money.
You can access the article by clicking on the picture below:
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