7 Common Annuity Mistakes and How to Avoid Them

As you shift your focus from saving for retirement to withdrawing money in retirement, an annuity can be a crucial part of your income strategy.

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As you shift your focus from saving for retirement to withdrawing money in retirement, an annuity can be a crucial part of your income strategy. An annuity can provide guaranteed income that lasts for your lifetime—no matter how long you live—and it’s often a good way to supplement income from Social Security and a pension, if you have one.

But the annuity universe includes products that range from straightforward immediate annuities, which guarantee a monthly payout in return for a fixed up-front investment, to variable annuities with guarantees, which can be complicated and expensive. It’s easy to make mistakes. Here are seven annuity missteps to avoid.

Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.