ARE ANNUITIES RIGHT FOR YOU?

This "Financial Focus" column is prepared by Edward Jones Investments, headquartered in St. Louis. Jones includes branches throughout the nation, including Cape Girardeau and Jackson.

Annuities have become increasingly popular in the past several years, largely because more taxpayers are seeking options to increase their retirement savings and control when they pay taxes. Although the benefits may be significant, annuities are not for everyone. Whether you are looking to purchase a fixed or variable annuity, there are several factors you should consider to determine if it will meet your objectives.

Investment objective

Annuities were designed to provide tax-deferred savings for or during retirement, as well as retirement income. If you are trying to supplement the savings in your employer-sponsored retirement plan, or are looking to begin saving funds for retirement, annuities can provide for the accumulation of savings with the advantage of delaying taxes until you withdraw the money.

Annuities can also provide a series of income payments that cannot be outlived.

Time horizon

The time horizon for an annuity should be long term. With fixed annuities, maturity dates can be as short as one year or as long as 10 to 15 years or more.

With variable annuities, surrender charges are imposed if the contract is liquidated within a period of time, usually the first seven years. In addition, because of the higher expenses found in variable annuities versus other investments, it is generally best to hold a variable annuity contract for at least 10 years.

Age

Because annuities are designed for retirement savings and withdrawals may be subject to a 10 percent penalty tax if taken prior to age 59 1/2, purchasers should identify their pre-retirement income needs and have sufficient other savings to meet those needs prior to purchasing an annuity contract.

Potential annuity purchasers also should consider the maximum commencement age in the contract. The maximum commencement age is the age at which the insurance company will automatically begin distributing the policy proceeds. To maintain maximum flexibility, annuity buyers should plan so that the contract surrender charges expire before the automatic distribution of proceeds begins (even if the insurance company is not currently enforcing distributions).

These are a few factors that you should consider when deciding whether to purchase an annuity. Your local investment representative can help you decide if annuities are right for you.

The Southeast Missourian does not recommend that readers buy or sell stocks featured in this column, which is provided for informational purposes only.