Federal report says annuities an option for some

Jul 26, 2011

Annuities could benefit some families

A recent government report shed light on the benefit of annuities for consumers as an alternative to savings distributions.

Experts told the Government Accountability Office annuities could present benefits to certain income-earners savings for retirement. Annuities are contracts taken out with life insurance companies and are designed to provide guaranteed income over the length of a person's retirement.

The report did not explicitly endorse annuities, but it said they could benefit retirees who convert a portion of their savings into an income annuity. Such a financial strategy could provide consumers with a diverse retirement plan, especially at a time when Social Security benefits represent nearly 65 percent of an average retirees' income, the GAO reported noted.

At the same time, the report noted the higher cost of annuities and said people who are expected to have shorter life expectancies would likely not benefit.

Recent reports show annuity sales have increased over the past few months, a possible sign more retirees are looking to the financial contract to keep their retirement income level healthy. Financial advisors can provide guidance on the right annuity strategy.

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