Those of you that are in, or nearing retirement, and do not have a guaranteed pension, may be asking yourself, “do I need an annuity?” At the risk of sounding audacious, my answer is, “YES!” Yes, you absolutely do. Now, whether you qualify for an annuity, or what type of annuity would be appropriate for you personally, is another conversation regarding suitability.
But how can I be so blatant, and so bold, by answering that question without even knowing your retirement situation? I guess it’s because I’m not the one who is saying, “yes, you absolutely need an annuity to cover your basic living expenses.” That conclusion is one of the very few things, if not the only thing, that the smartest economist and researchers in the world have agreed upon.
George Bernard Shaw once said, “If you laid all the economists in the world end to end, they still wouldn’t reach a conclusion!” These people do not agree on anything. Except, annuities. And that you should have one to cover your basic living expenses. The only debate that is still on the table is what type of annuity, how much should be allocated, and when the annuity should be allocated in your retirement.
Don’t take my word for it. I’m obviously biased. I want to sell you an annuity. That is the whole purpose of my business and I know they are the best retirement income products in the world. So, don’t listen to me. But you should want to listen to the experts that have nothing to gain from this research. And there is a ton of research on this topic.
Their conclusion is that absolutely no other investment – not stocks, bonds, CDs, mutual funds, managed money, or real estate – can take the risk of longevity or volatility off the table for your retirement security.
The debate is over! Those of you who know me have heard my story of how I came across the insurance industry to help solve a personal problem. I had lost my defined benefit pension and I ended up on a 7-year long research mission that lead me to the world of insurance products, including annuities. The interesting thing was, once I had discovered this information, I realized that not a single financial advisor, not a one, that I had spoken with had ever mentioned annuities.
When I took this golden information that I “discovered” back to the person I was working with, he told me, “oh, those are terrible. You don’t want anything to do with those.” What he didn’t tell me was that he really didn’t know anything about them. And since then I have learned quite a bit about how financial advisors get paid. When a person decides to protect their money from market volatility they are naturally going to use money that is currently being invested somewhere else. That invested money, or “AUM” (Assets Under Management), actually acts like an annuity to the advisor because they get paid no matter what. Whether they make you money, or they lose your money. You are their annuity!
After starting my agency in 2015, it has been a consistent issue with my clients wanting to go back and get their “advisor’s opinion.” Well, I can already tell you what it’s going to be, and it’s not going to be good! Instead of arguing with people, I found it better to not only do the math in real-time and show how annuities can improve the performance of a portfolio but also use third-party sources from people that are non-biased and a lot smarter than me!
I came across this gem of a research paper: Income Annuities Improve Portfolio Outcomes In Retirement.
The title says it all! So, instead of typing an entire dissertation on this study, I made a video to give you the highlights of it. I’m also happy to send you a copy if you’d like. I hope you enjoy hearing about it as much as I enjoyed reading it!
All the best,
Marty