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March 12, 2012
Annuities 101

Wondering whether buying annuities can help you save for retirement? Learn about the related terms, cost structure and possible penalties.

Transcript

Millions of people buy annuities to help guarantee a steady source of retirement income. But annuities come with complex rules and restrictions, as well as potentially expensive fees and cancellation policies, so it pays to do your research.

You'll need to decide between an annuity that starts paying out immediately, and a deferred annuity, where your account grows tax-free until you begin receiving payments later on. When comparing annuities, investigate details like: sales commissions, management fees, early withdrawl penalties and survivor benefits.

A good place to start your research is the Securities and Exchange Commission's website, at investor.gov.

Bottom line: Annuities can be a good investment option, but make sure you fully understand all the terms before signing on the dotted line.

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