It's important to recall that the person advising her to get an annuity almost certainly will be making some type of commission on it. The salesman's primary interest is in his/her fee, not your niece. The hidden fees are huge in variable annuities. It's almost never a good idea to even consider a variable annuity. What's called a SPIA (single premium immediate annuity) can sometimes be a good move for a small class of folks. The older a person is, the higher the annual yield will be, so waiting as long as possible is almost always a good idea when looking at a SPIA. The fees for a SPIA are much lower than a variable annuity, and the fees and investment losses associated with a SPIA usually run somewhere between 20% and 30%. This means that the insurance company is taking this amount as it's fee for processing and administering the annuity, plus getting paid a mortality fee in case your niece lives beyond her life expectancy. As a general rule, and it's a fairly solid rule, a decent porfolio of equity and bond mutual funds should be better for your niece, plus she will maintain control over her principal for life. With an annuity, she loses access to the principal, unless she calls Mr. Cash on TV to get a lump sum payment after paying Mr. Cash a ton of money in fees. Keep in mind that your niece can always decide later (at 70, 75, 85, or 90) to put a portion of her principal in a SPIA, so the train is not getting ready to leave the station on her choices. In fact, the train never leaves the station if she waits. Some people are willing to give up a lot in commissions and fees in order to get a guaranteed monthly payment, and for those folks a SPIA might make some sense, but not a lot of sense. Regardless, she should keep at least 50% of her principal in her own portfolio, with no more than 50% going into an annuity. In fact, she can purchase multiple small annuities as the decades pass. The botton line is this: It's rarely a good idea to buy an annuity, and never buy anything other than a SPIA. Good luck.
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