Asked by Kathleen  |  Submitted September 25, 2014

Is an annuity with death benefits for children a good idea or an expensive way to pass money?

It would be $200,000 and cost 3% every year. It seems like an expensive way to tie up 1/2 of my retirement savings.
Thank you

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  Answers  |  2

September 25, 2014

Annuities are generally an inferior way to invest your assets as it adds to the total costs and provides limited investment options with most being proprietary to the insurance company instead of best of breed. Remember that Annuities are always sold and never bought!!!

You do not need to invest in an Annuity since these dollars are residing within a retirement account. You don't need suspenders when you already have a belt! No need to pay for the annuity when you are already within a retirement account.

You should consider buying a term life policy to insure yourself as the proceeds are not taxable. Also, if you are in a tax bracket where you need to minimize the tax impact, you should first max out all your retirement contributions, etc. then max out your 529 plans, and then look at alternatives.

To be able to give you specific advice, we would need to ask the following questions:

1) How many kids do you have?
2) What are their ages?
3) What are their individual needs?

$commenter.renderDisplayableName() | 05.18.21 @ 07:03


October 14, 2014

This is an excellent question. Annuities may/may not be an ideal situation for you, but I think it would be in your best interest to compare and understand all your options. For example, for many, like my own Father, an annuity would probably work better than an insurance policy to accompishing passing funds to his children. In his situation, with his medical profile/history, he would not qualify for most life insurance and it would be too costly. He might, however, consider an annuity since it helps provide for his family and doesn't require medical underwriting. Please don't hesitate to reach out if you'd like to chat about this.

$commenter.renderDisplayableName() | 05.18.21 @ 07:03