Are annuities a good investment?

An annuity may be a good investment depending upon the situation of the person who is buying it. Once an annuity is purchased, it may be extremely costly to switch to another type of investment.

As of 2014, annuities have generally underperformed other asset classes, such as mutual funds, certificates of deposit and fixed-income investments, in terms of the net-dollar benefit received per dollar invested. Some annuities, which guarantee payments for the life of the annuitant or longer, represent good value for the peace of mind offered. Owners of annuities can designate beneficiaries who may continue to receive annuity payments or the value of the annuity in a lump sum upon the death of the annuitant, depending on the type of annuity purchased.