7 worst annuity mistakes
7. Investing too much money
Annuities are a great source of lifetime income, but they can also be inflexible. Immediate annuities can pay out a lot more than interest on CDs and other fixed investments. But to get that extra income, you have to give up control over the money: After you give the insurer the lump sum for an immediate annuity, you can’t take it back. And even with deferred annuities, which let you cash out or withdraw as much as you like after you invest, you will jeopardize your income guarantees if you withdraw more than a certain amount (often 5% or 6% of your guaranteed value) each year.
The best way to calculate how much to invest is to work backward: Add up your essential expenses in retirement, subtract money coming in from guaranteed sources such as Social Security and a pension, and invest enough money in an annuity to fill that gap.