What Are The Disadvantages Of An Annuity?

Everything comes with its own pros and cons so does annuity. Firstly, a common disadvantage is annuity income will be taxed just like ordinary income, so there is a chance that your tax rate could go up between now and the time you want your annuity to start paying out. Also, high fees can often be associated with annuities, which can make them among the most expensive investment products on the market.
Annuities may become a barrier for your flexibility as early withdrawal often means paying a penalty. At the same time, some annuities do allow penalty-free partial withdrawals or disability/hardship exceptions to fees. It can also be noted that annuities restrict the investment options available and saddle investors with limited choices.