Who doesn’t like the sound of “income for life”? Yet, whether you’re saving for retirement or looking to create a guaranteed paycheck that you can’t outlive in retirement (annuities can help with both), many people shy away from considering annuities.

To help you understand their place when saving for retirement and to help you create income in retirement, let’s set the record straight on some of the common annuity myths.

COMMON ANNUITY MYTH NO. 1: ANNUITIES ARE EXPENSIVE

Sure, there are fees associated with annuities just like there are with any financial product, but that doesn’t mean all annuities are expensive. The key is to understand the type of annuity you’re considering and the benefits and guarantees it offers, and then weigh those against your other options.

For example, annuities may offer valuable benefits and optional features, including tax deferral, a guaranteed minimum death benefit and income guarantees, that aren’t typically provided by other investment options. Choose only the features you really want and work with a financially solid and reputable company that is fully transparent about its fees.

COMMON ANNUITY MYTH NO. 2: THE INSURANCE COMPANY WILL KEEP ALL MY MONEY IF I DIE TOO SOON

Today’s annuities are designed for flexibility, and almost all offer the option to have your account value (in the case of accumulation annuities) or your income payments (in the case of income annuities) pass on to your beneficiaries should you pass away prematurely. (Learn more about the difference between accumulation annuities and income annuities here.)

The one exception is if you purchased an income annuity and select the “life only” payout option. Once annuitization begins, your income payments will continue only for as long as you live.

Of course, optional payout features can add to the cost of your annuity or reduce your income payments, so be sure you carefully weigh the costs and benefits for any annuity you may be considering.

COMMON ANNUITY MYTH NO. 3: I CAN CREATE LIFETIME INCOME FROM MY RETIREMENT ACCOUNTS ON MY OWN

Maybe, but each of us faces two wild cards when it comes to building retirement security: 1) You don’t know how long you’ll actually live, and 2) you don’t know how the markets will behave in the future, which means you run the risk of running out of money sooner than you planned. An income annuity can help you protect all or a portion of your savings from stock market losses by providing a reliable income stream that will last for your entire life, no matter how long you live.

COMMON ANNUITY MYTH NO. 4: ONCE YOUR MONEY IS IN, YOU CAN’T GET IT OUT

With accumulation annuities, this is completely false, as you can always withdraw your money — although, depending on the annuity, you may have to pay penalties and fees if you take it out too soon (similar to the way charges would be assessed if you took money out of a CD or 401(k) too early).

Ultimately, this myth’s roots come from income annuities, which do not allow you to withdraw the principal you pay, but provide income for as long as you live. Because of this, it’s wise to use an income annuity in conjunction with other savings or investments in retirement.

COMMON ANNUITY MYTH NO. 5: ANNUITIES ARE ONLY FOR OLD PEOPLE

Accumulation annuities can be a great savings tool for anyone, regardless of age — just ask one of the thousands of younger American workers who are using annuities as a tax-deferred way to sock away extra money for the future. A variable annuity1 (Which allows you to invest in sub-accounts that can be tied to the market) can be a great place to save money for retirement if you’re looking for a tax-deferred saving vehicle to accompany your 401(k) or IRA, if you’re planning to roll over a workplace retirement plan because you’re changing jobs, and especially if you’re interested in using that money to provide income in retirement.

1All investments carry some level of risk, including potential loss of principal. Withdrawals from variable annuities may be subject to ordinary income tax, a 10 percent IRS penalty if taken before age 59 ½, and contractual withdrawal charges.

Annuities are contracts sold by life insurance companies and are considered long-term investments that may be suitable for retirement.

All guarantees associated with annuities and income plans are backed solely by the claims-paying ability of the issuer.

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