Annuities are perfect for some investors

LOS ANGELES Three years ago, on Christmas Day, Gloria Perico lost her husband, Orlando. It was a tough time.

"I was very desperate the day he died, on Christmas morning," said Perico. "I had no idea what I was going to do."

There were so many things for this Burbank woman to think about, including her future and what to do with the money her husband left her.

"I would spend nights thinking how am I going to be able to pay the mortgage, how am I going to be pay the car," said Perico.

That's when Perico got in touch with an investment advisor who suggested she put the money into an annuity.

"Because she needed that lifetime income stream, she needed principle protection, she didn't want to take stock market risks," said Mark Kennedy, Kennedy Wealth Management.

Kennedy says annuities are not for everyone, but for some investors they make perfect sense.

"When you're getting to a certain age when that's the money that you have and you can't afford to lose it, that's where the proper annuity comes in play," said Kennedy.

Kennedy says there are three basic types of annuities, and each one serves a different purpose.

There are immediate annuities, which is like a pension plan delivering an income stream but the principle investment is locked up forever. There are variable annuities, which are investments directly into the stock market. There is no principle protection and they have high fees. And there are fixed or fixed index annuities.

The annuity has a stated rate. Generally the stated rates on annuities are a little bit higher than bank rate.

"But you can also link to a stock market index and potentially grab more return. It gives you the best of both worlds without the risk," said Kennedy.

Before buying an annuity Kennedy says, be careful where you get your advice. Get with a knowledgeable advisor who specializes in safe money planning. Don't focus on historical returns. Often those are only averages of the best ten years. And, don't believe everything you read on the Internet. It may be only opinion and not facts.

Perico says she's happy with her choice.

"So far it's worked out really nicely," said Perico.

There is much more to annuities, and there are some variations. So be sure that you talk to an advisor who can give you the time to explain one to you completely, not just the highlights.

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