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I just finished reading the Fool School article about annuities and it definitely doesn't sound like a great investment vehicle, but needless to say, the thing that set off my radar was the fact that the salesperson told my parents that they're guaranteed to make 7%, regardless of how well the investments in the annuity do.

Here's my parents story:

My Dad put most of his money in the stock market. Some stocks did well, some didn't. He's 84 and their portfolio is worth today about what it was 20 years ago (adjusted for inflation), but they've been living out of it for those 20 years on dividends and equity growth. They don't have an extravagent lifestyle, but they do own two homes and nice cars and remodeled the kitchen and so forth.

My Mom is more conservative. She decided that she would take a portion of their savings and invest it in "coins" and "an annuity." The coins are worth half what she bought them for, and the annuity company went out of business after two years, and the income stream immediately went to zero.

It could happen. Companies go out of business all the time. I'd recommend a heck of a lot more research, including the fact that even "healthy" companies sometimes go upside down.
 
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