A widely observed theme when talking about retirement is the disappearance of assured sources of income, in the form of defined benefit pension plans.  Many corporations have terminated their pension plans, which remain the norm only in government service and unionized industries. Whether or not that was a good idea, the financial aspects of retirement have changed irrevocably. Most people who participate in retirement plans now do so through 401(k) plans, which offer no assurance of a level of income in retirement. Now, many are asking if it’s possible to replicate the defined benefit pension plans and their guaranteed level of income through the purchase of annuities. This has, not surprisingly, been a theme for people who sell annuities; but it’s also a topic discussed extensively at federal government agencies concerned with retirement. It’s certainly worth considering, but as with every other financial product, it’s important to know what you’re buying: what are the terms, guarantees, etc. One of the knocks against annuities in the past has been the high level of fees associated with them. Like life insurance, the subject of annuities is a complex one, and I would be concerned about buying an annuity without independent advice or at least some very extensive explanation. For people without a high level of financial acumen, this argues for consulting a financial planner whose compensation is not dependent on the purchase of a product. So, annuities are worth some inquiry, but either the buyer or an independent financial planner needs to understand what’s being bought.

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