Retirement researchers are often enthusiastic about annuities, but many consumers are reasonably skeptical. Here to discuss basic information about annuities and their pros and cons is Christine Benz, Morningstar’s director of personal finance and retirement planning.
This interview has been edited for length and clarity.
Q: How do income annuities work, and how they are different from investing in something that pays out income like bonds?
A: An annuity is a contract with an insurance company. In the most basic annuity type, income annuities, you give the insurance company a pool of your money, and they send it back to you as a stream of income over your lifetime. Those types of products give you more income than you could earn by investing in a bond.
