Episode 39: The Top 6 Reasons People Avoid Annuities

Why do some people flat out avoid annuities for their retirement? Guaranteed income annuities can provide everything needed for a secure retirement: guaranteed income, safety, security, and peace of mind. Despite these benefits, many people still avoid them. Let’s explore the top six reasons why people might hesitate to use these powerful retirement tools.

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The Case for Guaranteed Income Annuities

Guaranteed income annuities offer a range of benefits:

• • Guaranteed Income: Provides a steady stream of income for life.

• • Safety and Security: Protects your principal investment.

• • Peace of Mind: Removes worries about market volatility and running out of money.

• • Possible Long-Term Care Benefits: Some annuities offer additional coverage options.

A study by the Financial Research Corporation found that no other investment can match the income annuity for retirement security. It’s one of the most efficient ways to turn your savings into dependable income.

Benefit	Description
Guaranteed Income	Provides income for life
Safety and Security	Protects your principal from market losses
Peace of Mind	Reduces worry about market volatility and outliving your money
Long-Term Care Benefits	Some annuities offer additional care options

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Even though at their core, they are simple, have high payouts, and offer flexibility, some people still avoid annuities. This can happen for several reasons:

• • Advisor Influence: Advisors might not understand annuities or prefer to keep charging fees.

• • Bad Experiences: A friend might share a bad story, even though the issue was likely with the advisor, not the annuity.

• • Misconceptions: People might not fully understand how annuities work, leading to missed opportunities.

The downside here, is that not using an annuity could leave them at a real disadvantage in retirement.

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Reason #1: The Misconception of Annuities

The biggest reason I’ve hear people use to avoid annuities is due to how they’re presented. The words used can create very different impressions. For example, when buying beef, does it sound better to buy “75% lean” or “25% fat”? It’s the same product, but the description changes how we feel about it.

Similarly, if an advisor says, “buy this annuity,” it might sound like you’re losing a large sum of money. But if they say, “transfer a portion of your portfolio into an annuity,” it feels more like a smart financial move.

I’ve learned a lot in my journey as a retirement specialist, but discovering the need to help people understand that annuities are about reallocating money for a specific purpose, adding value to their retirement instead of buying something changed the entirety of my business.

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Reason #2: Overwhelmed by Annuity Options

The sheer number of annuity options can be overwhelming. With about 200 different companies offering annuities, each with multiple products, it’s easy to get confused and frustrated. Creating the ATLAS Annuity Strategy has simplified this process. In three steps, we:

1. 1. Define Your Goals: We start by figuring out exactly what you want your money to do for you.

1. 1. Narrow Down Options: Once we know your goals, we can narrow down the options to find the best match.

1. 1. Use Third-Party Software: We use software to compare options and find the best deal, removing any guesswork.

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Reason 3: Too Many Steps in Funding the Annuity

Another reason people avoid annuities is the perceived complexity of funding them. If your employer’s retirement plan offers a simple annuity option, most people will take it. But if you need to move your money to another annuity, the process can seem daunting.

• • Challenges: Moving money can be tricky, especially if your current company makes it difficult.

• • Financial Advisor Influence: Finding the best annuity for you based on fact, and not opinion.

But remember, it’s your money. At ATLAS, we stand by our clients every step of the way, even getting on the phone to ensure everything goes smoothly.

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Reason 4: Perception of Fairness in Annuities

Many people feel that annuities are unfair because of caps on returns. For example, if the market does really well, your annuity might only give you a portion of those gains. However, it’s important to understand how annuities work:

• • Protection: Annuities protect you from market losses, which is a key benefit.

• • Caps: The annuity company isn’t keeping the extra profits for themselves; they’re balancing risk.

At ATLAS, we educate our clients about how annuities work so they can see the value in this trade-off.  Such as a previous podcast titled:  How Annuity Companies Make Money.

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Reason 5: Misconception About Liquidity

A common misconception is that annuities lock up all your money, but this isn’t true. Here’s what you need to know:

• • You Can’t Put All Your Money in an Annuity: Companies only allow a portion of your assets to go into an annuity.

• • It’s Not All or Nothing: Annuities are meant to serve a specific purpose, not take over your entire portfolio.

At ATLAS, we show clients how an annuity can actually create discretionary liquid assets, giving them more liquidity in the long run.

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Reason 6: Fear of Missing Out (FOMO)

Fear of missing out, or FOMO, is another reason people avoid annuities. Some prefer to risk their money in the market for a chance at bigger gains, even if it means bigger losses. However, when you rely on your portfolio for income, you can’t afford to risk it all.

Here’s how we address FOMO:

• • Secure a Portion: We help clients secure part of their portfolio with an annuity.

• • Increase Risk in the Rest: With a solid foundation in place, you could take more risks with the rest of your money (always speak with a licensed advisor before the purchase or sale of any security).

This way, you get both security and the chance for bigger gains.

While guaranteed income annuities certainly aren’t a tool for everyone, these 6 reasons I cover here are specifically for people who are looking for safety and security using a plan that is on autopilot, but can’t seem to get past one (or more) of these reasons.

 If you have one I didn’t cover, feel free to leave it in the comments.

All the best,

Marty Becker

Podcast Episode 39: The Top 6 Reasons People Avoid Annuities

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