Forums » Finances and the Military

"Do I need an annuity?"

    • Moderator
    • 42 posts
    August 3, 2014 8:53 AM PDT

    A reader asked me last week whether it's worth buying an annuity.

    I think that the only reason for an annuity is "longevity insurance": making sure that you don't outlive your savings. You place a bet with the insurance company that you'll live longer than the average for your demographic & health. If you win, you'll collect their money for the rest of your life. If they win, then they'll keep the money you gave them.  Your goal is to collect more from the insurance company than you would ever earn from any other investment.

    Annuities used to be overpriced and oversold, but in the last 10 years they've become more reasonably priced.  Most people only need a cheap, simple, single-premium immediate annuity.  They usually only need it when they retire, or even when they're older.  For most people, the only annuity they'll ever need is Social Security.

    Military retirees have a pension with survivor benefits (in addition to Social Security), so they definitely do not need to buy another annuity. However some military veterans (and their families) don't like the volatility of the stock market and they're not interested in managing rental real estate. For them, a single-premium immediate annuity can protect a portion of their investment portfolio and help them sleep comfortably at night.

    The entire post (with links to more details and an annuity calculator) is at:

    I'm not trying to sell anyone an annuity-- I'm only explaining how they help keep a retirement portfolio going for as long as you do.  I'm happy to answer more questions about them and to debunk the myths.