Annuities do carry some risks, including:
- Liquidity Risk: Annuities often have long surrender periods, during which withdrawing funds can incur significant penalties.
- Inflation Risk: Fixed payments may lose purchasing power over time if they do not adjust for inflation.
- Credit Risk: If the insurance company faces financial difficulties, it may impact your annuity payments.
- Market Risk: Variable and indexed annuities are subject to market performance, which can affect the value of your investment.
- Complexity and Fees: Annuities can be complex products with various fees that may erode your investment returns. Understanding the fine print is crucial.