Annuities

If you have a nest egg but you're concerned about outliving your resources, an annuity might be a good option to consider. When you purchase an annuity, you pay a lump sum upfront and receive regular payments back over a predetermined period-of-time, usually the rest of your life.

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An annuity can help stretch your savings and ensure that you'll always have some reliable income. Their big benefit is that you continue to receive monthly income regularly, even if your purchase premium runs out. If you live for a long time, you will get more back than you put in. The underwriter takes the risk that you might live longer than the money lasts - and makes extra profits if you die early. Underwriters don't go into the annuity business expecting to lose money, but annuities can still be a better deal for you than just depleting your bank account every year.

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Another benefit is that annuities aren't fully counted as assets by Medicaid when you apply for government assistance. The income from the annuity is counted as a "resource," but the full sum originally used to purchase the annuity is not.

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Annuities are complex financial tools with many variations. Some require initial purchase to receive future payments, while others deliver immediate payments; some are based on a fixed interest rate, others work off variable rates. You'll want to do some homework and talk to a trusted financial adviser about which annuity options might be appropriate for your situation.

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Be very cautious when investing in annuities. There are unscrupulous marketing schemes pushing phony annuity deals that target vulnerable seniors through community centers, adult education seminars, telemarketing, and slanted advertising. Outright annuity fraud is more common than most people realize. Always use your common sense. If it sounds too good to be true, it might be a scam. You'll want to choose a reputable company when you buy an annuity and work with a highly recommended representative. Make sure your representative helps you think through some of the trickier details like inflation.

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Disclaimer:  The Parkinson Association of Alabama provides education and awareness so that you may discern your own planning. Our information is never intended to be guidance or replace that of a financial advisor or expert. We simply want to provide enough information as a conversation starter as you work with your respected financial advisors for mapping out your financial budgeting plans for community living. The PAA cannot be held liable for any financial decisions you make regarding your own planning.

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Sources:

The Davis Phinney Foundation. Chapter 15 - Long-term Care and Financial Planning. Every Victory Counts.  Page 249. "Manual." Sixth Edition, 2021.

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