Annuities are more than just financial products. They are financial solutions that fill a need or address a concern, whether for tax savings, guaranteed income for life, portfolio stability, guaranteed growth, or simply some peace of mind. But, they are also somewhat complex, which is, perhaps, why some people shy away from them. But once you more clearly understand your own needs, priorities, and tolerance for risk, it is much easier to consider annuities as a solution and as a way to fill a need or address a concern. And, that’s the only reason why you should buy an annuity.

Here are the top 4 problems annuities solve:

1. How long will my money last? : That’s not an uncommon concern. Recent studies reveal that most American public is highly anxious about having enough money to last their lifetime. Annuities today offer the same promise as they did to Roman citizens 2000 years ago, and that is that the income generated from a cash deposit is guaranteed to last as long as you do, regardless of how long you live. Your annuity contract with a life insurance company becomes an obligation, backed by the company’s assets, to make monthly payments based on a cash deposit and your life expectancy. If you live beyond your life expectancy, the company is still obligated to make the payments.

2. What do I keep up with inflation?: The fact is that if you do live for 20 or more years, your cost of living will likely increase. It’s one thing to have enough income to last a lifetime, but it can make life pretty difficult if it can’t keep up with your actual expenses. Many people are relying on their retirement funds to keep growing in their retirement accounts. Their retirement funds will have to be invested in risky growth investments for their income to increase over time.

Most annuities include an option that ties your income to an inflation index so it will automatically increase. While these options do cost extra, they can turn out to be priceless when the economy goes sour again.

3. Where can I grow my money but not lose it?: Annuities have always been considered among the safest of all savings vehicles. During the Great Depression, when customers of failed banks were receiving cents on the dollar, life insurance companies made their annuity customers whole.

Unlike banks, which are required to maintain a small fraction of reserves to cover immediate obligations, life insurance companies must have nearly 100% of funds on hand in the form of safe, liquid assets. Sure, a few life insurance companies have become insolvent, but the states ensure that their reserve requirements will be met by other life insurance companies.

4. Why should I pay taxes on the money I will never touch?: Annuities are one of the very few individual financial instruments that allow your funds to accumulate without having to pay taxes on them. Your funds will eventually be taxed as ordinary income when they are withdrawn: however, for most people, the tax rate in retirement will be lower than during their working years. It is essential to be aware of the penalty for withdrawing funds too early (before age 59 ½); however, saving for retirement may not be a concern.

There’s much more to annuities that you will need to know – However, your most important consideration is how it will help you address your needs and concerns. If you share one or more of the concerns listed here, an annuity may be a good fit for you. Speak with a professional today to learn more!