What is the pro and con to using an Annuity as a retirement tool vs a Traditional or Roth IRA?
If you are using a Roth or Traditional IRA, you can use an annuity, but you may save money by using a direct mutual fund instead. The benefit of an annuity is tax-deferral, but you already have that in the IRA wrapper.
Using an annuity within an IRA usually will cost you more money, because of the insurance protection built into the annuity. The longer your time horizon, the less sense an annuity makes. An annuity does guarantee return of your premium payments and a small return, should you die before annuitizing, but if your investment is wise, you won’t really need this protection.
The pro is the insurance protection, but the con is the additional internal costs. Your annuity also may provide less investment choices than a mutual fund family would provide. In addition, a self-directed IRA can be used for a wider range of investments, including real estate.
See your financial planner for assistance in your retirement planning. Good luck!
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