Phone call with Fidelity rep

I’m 50 and don’t have an answer for you. But I’ve always been told to stay away from annuities. I manage my own stuff for better or worse, but I’m just such a an old curmudgeon nowadays that I feel like everybody’s out for themselves and their pocket book (ie sell the highest commission product vs what I truly need)

It all depends what you want. If you only wanted guaranteed regular income and do not want to grow an investment to leave after you die, then an annuity will do this. You are giving up all upside for very low risk (there is always some risk such as the annuity company could fold) and usually lose the money when you die (some products vary). If you are willing to accept some risk, then just investing in an S&P 500 index fund or Total Market Index would give you growth and income in the form of dividends. I personally would choose the index fund but annuities are a tool to consider if you understand what you are giving up.

Most likely, the "rate" he is quoting you is calculated by including the annuity's return of capital to you. In other words, part of the money it pays you every year is a part of your original investment, so that it is completely exhausted by the end of the annuity. It is not necessarily bad, but saying something like "...an annuity pays a 6.6% rate but those CD's only pay 5%..." is grossly misleading.

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Idk what everyone is talking about.

High quality single premium deferred annuities pay higher rates than CDs with slightly more risk. In an IRA they’re very straight forward. For example, you can get 5.25% for 5 years and then cash out the account back into your IRA.

While you can annuitize them, you don’t have to do so. They’re not perfect, but they’re a tool works for low risk profiles.

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Yes, you are right. I was only thinking of the types of annuities that pay out annually over a lifetime or specified period. I frequently see them justified like my example above.

Sometimes a different type of annuity with a different payout might be of benefit to someone. You can get a 5.25 % rate with either CD's or moneymarket, but securing it for five years might be of value even though these rates are likely to continue and go higher.

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High quality single premium deferred annuities pay higher rates than CDs with slightly more risk. In an IRA they’re very straight forward. For example, you can get 5.25% for 5 years and then cash out the account back into your IRA. While you can annuitize them, you don’t have to do so. They’re not perfect, but they’re a tool works for low risk profiles.

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my thing with annuities is what happens when shot hits the fan for the insurance company and they can’t make their bets (products). Those contracts are massive and it scares me that a technicality could just ruin the whole deal you initially signed up for.

As long as it doesn’t convert to lifetime income payments it’s a viable alternative. It’s called a fixed rate annuity and terms from 3 to 10 years.

Can you not just create your own bond ladder using ETFs?

That would function like an annuity to some extent.

Blackrock offers their iBonds ETFs and Invesco has a bond ETF fund range.

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Annuities are protected up to $250k by the state. Other states have this as well.

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Those are illusory if you dig into state guarantees, most are grossly underfunded, especially if a company has issued a ton of policies in a given state and the company blows up. This reminds me of the dumb fricks on the BOD I'm own that can't see the problem with 5-yr CDs that are callable after 12 months when you can invest in similar term CDs that are non-callable and it costs 15 bps less than the callable CDs and your not at risk of re-investing at much lower rates.