With all the fear that many Americans have over their investment futures, more are giving annuities another look to see how they may benefit their portfolios.

While annuities are not meant to be an answer for everyone’s financial needs, they can serve a valuable purpose in more ways than one.

For investors who turn their attention to annuities, they will find a number of benefits that can serve them well.

First, an immediate lifetime annuity contract can offer an investor a series of guaranteed periodic payments for their remaining years, therefore removing the fear of living too long on too little money.

Secondly, annuities are a good selection for those investors who want to steer clear of risking a substantial loss of their savings.

Investors should also keep in mind that given the different concerns many have with the sustainability of Social Security and pensions, annuities can work to replace a good portion of those finances in later years.

With annuities, investments are permitted to grow tax free, and the sum amount of the annuity will be equal or higher to the value of the invested figure.

Tax benefits with annuities have proven a big attraction to many different investors, given the fact that individuals can triple compound their financial vehicles. With an annuity, an investor can obtain interest on their principal, interest on their interest, along with interest on what they would typically pay in taxes. An investor will not pay income taxes on annuity interest until the time they remove it from their annuity.

Another plus for annuities is the investor can make a withdrawal at later time unlike with 401 (k)s and IRA’s. At the time a withdrawal is made, investors can receive their funds in several different ways, including a lump sum distribution, periodic distribution, systematic distribution or as an annuitization.

As with any product, there are also some red flags that investors should take into account when considering the purchase of an annuity.

First, the majority of annuities are sold through insurance brokers and other salesmen who will receive a commission; 10 percent or more in some cases.

Secondly, investors will oftentimes be dealing with a prohibitive surrender fee for removing money from an annuity during the first several years after purchase.

Surrender fees can run around 7 percent of one’s account value if the investor departs after one year. In some cases, annuities will come with surrender charges up to 20 percent in the initial year.

Finally, annuities can also involve large annual fees. Among the fees can be insurance charges, investment management fees and expenses for different insurance riders.

For investors on the fence about whether or not to purchase annuities, it is always best to do one’s research, talk with an investment professional and decided if the advantages outweigh the disadvantages.

Dave Thomas is a writer based in San Diego, California. He writes extensively for an online resource that provides expert advice on managed voip service for small business owners and entrepreneurs at Resource Nation.