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Next Gen Econ > Personal Finance > Retirement > Why Do Financial Advisors Offer Clients Annuities?
Retirement

Why Do Financial Advisors Offer Clients Annuities?

NGEC By NGEC Last updated: July 31, 2025 11 Min Read
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Some financial advisors promote annuities because they offer tax deferral, guaranteed income, or principal protection. But while these features can support retirement planning, annuities often carry high fees and commissions that can influence recommendations. Knowing why advisors recommend annuities can help you ask better questions and evaluate how this option could fit into your financial goals.

What Is an Annuity?

An annuity is a financial contract typically offered by an insurance company. It’s designed to provide a stream of income in exchange for an upfront payment or a series of contributions. Some annuities begin payouts immediately, while others start at a future date. The basic appeal is predictable income, but the structure and terms can vary widely.

There are several types of annuities. Fixed annuities offer a guaranteed interest rate and set payments. Variable annuities allow the owner to invest in subaccounts tied to market performance, with income that fluctuates accordingly. Indexed annuities offer returns linked to a market index, with downside protection and a cap on gains. Deferred annuities delay payouts, while immediate annuities begin disbursing income shortly after purchase.