For Mark Roberts’ Use: If you talk about fixed annuities in a room full of investors, you’re likely to receive a mixed reaction. A fixed annuity is, in layman’s terms, an insurance contract that guarantees a lifetime income. The immediate appeal is obvious: even an IRA or 410(k) does not guarantee income, and many people worry about running out of money in retirement. There are definitely positives and negatives to this investment product, so whether a fixed annuity is right for you will really depend upon your individual situation and your personal feelings about them.

Some of the positives of fixed annuities include a measure of protection against market downturns, and guaranteed investment returns. This may appeal to those who have low risk tolerance, or those who have previously lost large sums of money in a fluctuating market. Fixed annuities also grow tax-sheltered until you being taking withdrawals. Some retirement experts believe these annuity products have a place within retirement portfolios because they can protect you from outliving your money.

On the other hand, the fees for fixed annuities sometimes run much higher that you would expect. They also may not pay off as much as other types of investments, in the long run. Fixed annuities also charge high surrender fees if you withdraw money in the first six to eight years, so they aren’t a product you want to consider if you’re not absolutely sure you want to stick with it.

Due to many recent changes in the industry, many fixed annuity contract owners don’t understand their products or how changes affect them. For this reason, it’s extremely important to investigate every aspect of a fixed annuity contract before purchasing it. There are positives and negatives to fixed annuities, but the decision to purchase one should be made very carefully after consultation with a certified financial advisor.