Annuities have a bad reputation among many investors, with fees that often exceed what other types of investments charge. But some annuities can be extremely useful, and one type known as the deferred income annuity has gotten more popular lately.
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at deferred income annuities and their pros and cons. Dan notes that by giving you pension-like monthly income in retirement throughout your lifetime, deferred income annuities take away the risk of your outliving at least portion of your money. The trade-off, though, is that if you die before you reach the age at which the deferred income starts, you can end up with nothing. Dan notes that you can choose annuity options that would leave something for your heirs, but you'll pay more in upfront costs for an annuity with those options. Dan concludes that for some, deferred income annuities make sense, but you need to weigh your own financial situation to make the best decision for you and your family.
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