As of 2015, Suze Orman advises that annuities can be beneficial in certain cases, but are not always the best investment to make. They do have the benefit of being extremely low risk, but they also have the drawback of not giving the best return.Continue Reading
A single premium deferred annuity guarantees a set interest rate for a specific time period, according to Suze Orman. After the owner initially pays the lump sum, interest grows tax-free for the life of the contract. When money is withdrawn, the taxes are applied. These annuities are good for those who want a risk-free investment, similar to a CD.
An immediate annuity gives the owner or beneficiary a set income for the rest of her life. All of the initial investment is signed over to the insurance company permanently, and the rate of income is based heavily on current interest rates, so Orman cautions against these annuities.
Variable annuities allow a person to choose mutual funds in which to invest. The main advantages are that the gains are all tax-deferred and that the person cannot get back less than she initially invested, explains Orman. Tax sheltered annuities are similar to a retirement plan and are good investments. Indexed annuities follow stock indexes like Standard and Poor's 500, but only return a percentage of the gains. Indexed annuities are beneficial because the investment can only grow in value, but indexed annuities do have the disadvantage of increasing the investment at a smaller percentage than the index they follow.Learn more about Investing