You should only be considering the purchase of a tax-deferred annuity, once you have already fully funded your IRA or 401(K) plan for a given tax-year. However if you have already paid the maximum into your other retirement plans, and still have some money left over to invest, it might be a good time to think about adding an annuity to your diversified portfolio of investments. There are several advantages that can make annuities an attractive component of a well-rounded portfolio.

One of the main appeals to annuities, is that like other retirement accounts, such as an IRA, the money invested is tax-deferred, until the annuity matures and you begin receiving payments – yet unlike an IRA, there is no limit to the amount you can contribute annually. Other attractive features of annuities include:

• A death benefit
• You do not have to apply or qualify for most annuities
• Annuities are not attachable by creditors in most states
• Annuities are not subject to probate in all 50 states

Considering Annuities 

Annuities could be a good choice to diversify your portfolio and help to secure your retirement dreams. However as with any financial or insurance product, it is important to understand the different kinds of annuities, and know your options when shopping for a long-term investment. Here are a few things to consider before committing to signing an annuity contract with any insurance company or brokerage institution.

• What is the rating of the company or financial institution issuing the annuity?
• What fees do they change and what brokerage commissions do they receive? This is important so that you are sure a given agent or investment counselor is recommending an annuity product because it is really best for you - and not just because it pays him or her the highest commission!
• Be sure to look at the Mortality and Expense (M&E) fee structure of the annuity contract thoroughly. M&E fees can vary from company to company and contract to contract

Before deciding if you need an annuity, take a close look at your current retirement assets. Does it seem like there may be a good possibility that you will outlive your income? Then an annuity may be right for you. Next when considering the types of annuities available, evaluate how big of a "risk taker" you are. Are you the type of investor that prefers a stable investment, which may have a lower yield, to something more volatile? Then a fixed annuity is probably a better choice for you than a variable annuity

Finally, before you invest in an annuity, check with your financial advisor or financial institution if you can increase the maximum amount of your contribution to your IRA or 401K. As we have said before, it is only advisable to purchase any annuity contract after you have made the maximum contribution to these other investments.