Is an annuity right for you? Six questions to ask

Published August 25, 2020
  A financial advisor discusses annuity documents with a couple at her Edward Jones office.

When it comes to your retirement income strategy, it's important to consider ways to ensure your money lasts as long as you need it. Certain annuities can provide guaranteed payments for life (annuities with lifetime income benefits), which may be a strategy to consider for "income insurance." But, these annuities are not for everyone. Before you make any decisions, discuss these questions with your financial advisor.

1. How much of your necessary expenses are covered by outside income sources, such as Social Security and/or a pension? Most – Little

The more income you have from Social Security and a pension to cover your necessary expenses, the less you might consider an annuity.

2. Rate your ability to reduce spending and expenses in case of unexpected events. Higher – Lower

The more you can cut back your spending when the market isn’t performing well or have cash reserves to cover unexpected expenses, the less you might consider an annuity.

3. What is your comfort with risk? (You can work with your financial advisor to complete a more detailed Risk Tolerance Questionnaire.) Higher – Lower

The lower your tolerance for market fluctuations, the more you might consider an annuity.

4. Given your current health and family history, rate how long you expect to live relative to the average life expectancy of early- to mid-80s. Shorter – Longer

If you live longer than you expect, you could outlive your money. Lifetime payments from an annuity can help guard against this.

5. Which of the following is more important to you? Leaving a Legacy – Retirement Income

Because you exchange access to principal for lifetime payments with certain annuities, it may affect the amount you can leave as a legacy.

6. Which of the following is more important to you?

Greater control over assets – Higher lifetime income

While the primary purpose of these annuities would be to provide guaranteed payments for life, these benefits have annual costs that will reduce your investment return. They also may restrict the control of your assets – including investment options and access to funds - in order to guarantee the income payments.

The more your answers are to the right, the more appropriate annuities with lifetime income may be, while the more your answers are to the left, the less appropriate annuities may be for your situation. However, before making any decision, be sure to discuss these questions with your financial advisor.

Important information:

All contract and rider guarantees are subject to the claims-paying ability of the issuing company.

The prospectus will provide you with this information, as well as additional information from the insurance company or subaccount investment manager. Your Edward Jones financial advisor can provide a prospectus, which should be read carefully before investing.

Edward Jones is a licensed insurance producer in all states and Washington, D.C., through Edward D. Jones & Co., L.P. and in California, New Mexico and Massachusetts through Edward Jones Insurance Agency of California, L.L.C.; Edward Jones Insurance Agency of New Mexico, L.L.C.; and Edward Jones Insurance Agency of Massachusetts, L.L.C.

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