Annuities or Stock Market in Retirement

Thinking about Retirement Planning? Critically, you will probably have to decide about where to invest your money for a monthly return after you leave employment.

Brief facts about Annuities or the Stock Market that you should keep in mind are provided below. The highlighted facts as stated below are arranged and shown for comparison purposes of the two forms of investment. Every investment, including stocks and annuities, have a myriad of details, conditions and terms that are not shown in this comparison. Before making any investment decisions, all potential investors should seek competent professional guidance.


Stock Market

Since 1923, the Stock Market S&P 500 index of the largest most stable US companies shows an average 12.25% annual rate return. Some years more is realized and some years less is experienced…some years even drastically less in returns appears. Using a compound growth rate for comparison purposes, the annual average rate of return has been between 5 and 8 percent annually for a rate of return over 30-year intervals. Financial planners typically use a 6% annual compound rate of return for stock market estimates and projections into the future.

Investing in the Stock Market, if using mutual funds as a vehicle, can be managed relatively hands-free. However, over time, many investments experience a shelf life…meaning they peak in expected benefits and may begin a downward valuation. So, an investor is typically left on his or her own as to when to sell an investment if negative results arrear which require a sell instruction.


Benefits of Mutual Funds

  • Generally low management fees by mutual fund
  • Investor can sell without penalty after a short time period
  • Investor can know identity of the underlying stocks


Drawbacks of Mutual Funds

  • Subject to current taxation unless owned in an IRA or in a retirement plan
  • If investor must sell during a down market or a bear market, the investor could experience a loss of investment principal
  • No income options, guarantees or death benefits are available



Annuities are contracts generally offered by an insurance company. The purchaser pays a specified amount and the company pays back income to the purchaser either immediately or at some time in the future.

One of the main reasons for anyone to buy an annuity is to avoid outliving their money. Income payments can go on for the rest of a buyer’s life, which means the buyer will never run out of money.

The purchaser of an annuity has no management requirement.

Annuities over time show an average annual rate of 3.27% for a return.

Tax deferred savings can be realized by an annuity purchaser.

Invested money in a tax deferred annuity grows income tax free until distribution.


Benefits of Annuities

  • Income payments can go on for the rest of a buyer’s life
  • Tax deferral on purchaser principal contributions
  • Death benefits for heirs are available
  • Options are available for guaranteed living benefits


Buyer Beware

  • Expensive commissions, fees and other charges
  • Potentially taxes on withdrawals
  • Potential penalties if withdrawal of funds before age 59 ½
  • Erosion of benefits received in the future due to average annual inflation reduction of future income value…historically at 3%


IMPORTANT NOTICE: Past performance is no indicator or guarantee of future results. Stocks, Mutual Funds Shares and Annuities have potential rewards, but also large potential risks. You must be aware of the risks and be willing to accept them in order to invest any funds. Don’t invest with money you can’t afford to lose or have access to when necessary. Annuities are considered illiquid. The information outlined is not complete and any investor must seek proper advice from a professional before investing any money. No guarantees are offered within this communication by Bart Rice. No investment advice, legal advice or accounting advice is offered herein. This is neither a solicitation nor an offer to buy or sell stocks, securities of any kind, mutual funds, or annuities.


Bart Rice, Copywriter                  720-336-8344     

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