Let’s face it… running out of money during retirement is a #1 concern many retirees face today. How sure are you that your money is protected from market volatility?
According to a recent poll with 3,257 people, as reported by the AARP, 61% said they fear running out of money more than they fear death.
Because of these glaring concerns, retirees are turning to annuities now more than ever…
But, herein lies the problem...
When considering an annuity for retirement income purposes, many consumers are initially intrigued by the idea of having a guaranteed lifetime income stream…
But oftentimes disenchanted after learning that most annuities also tend to have relatively low upside growth potential, level income payments (no inflation adjustments), and little to no liquidity or flexibility.
To better understand and avoid the common frustrations that come with researching and purchasing an annuity, we must first understand the core belief systems that typically guide a standard annuity sales process.
We have found that many times when someone is interested in purchasing an annuity, it is because somewhere along the way they either read or were told that an annuity might be something worth considering for retirement because of the safety and guarantees usually associated with fixed annuities (or in some cases variable annuities).
But here's what's MOST CONCERNING...
What we believe lies in the fact that many annuity sales scenarios involve an annuity agent, "helping" a consumer shop around for what they imply is the "perfect annuity" to fit the consumer's needs.
With many modern annuities offering a plethora of "living benefits" and additional riders (some of which can significantly increase the underlying fees of the contract).
It's no wonder that consumers can begin to incorrectly believe that this ONE SINGLE ANNUITY PRODUCT might actually be capable of meeting his or her needs for income, growth, safety and preservation of principal during retirement.
The truth is, however, that there is NOT one single annuity product on the market today, whether it be a fixed, variable, immediate, or hybrid annuity that is contractually designed in such a way that it can actually deliver ALL of those desired results to a client at the same time.
The simple fact to remember is that annuities may be good at EITHER growth, OR income, but they simply mathematically cannot do both at the same time.
And it is this either/or scenario that can have a significant negative impact on many retirees who unknowingly commit their life savings to these types of products only to discover this reality too late....after they have already locked in to a significant commitment period with major surrender penalties for cancellation.
We refer to this glaring problem as the “Modern Annuity Dilemma”…
The Modern Annuity Dilemma is profound!
Why aren't annuities bought, sold, and marketed more like mutual funds? Here's what we mean. You would never put ALL your money into ONE big mutual fund would you?
Most consumers, even those that are not terribly sophisticated with money and investing, understand generally that there are typically greater benefits to be had by using a diversified mutual fund portfolio instead of using just one mutual fund by itself.
Why then, when it comes time to shop for annuities, does the mentality seem to switch from diversification and using multiple mutual funds whose individual styles and features can potentially complement one another, to this new mentality of comparing 3 or 4 annuity companies with the intention of choosing just ONE to ultimately purchase?
When we work with a new client and assist them in exploring annuity options, one of the most important things we stress is that annuities have good parts AND bad parts!
So instead of shopping around for that one "magical" annuity that doesn't actually exist, what if we embraced from the very get go the idea that we can COMBINE several different annuities from different highly-rated companies together in a blended annuity portfolio, and set it up deliberately from the beginning so that the GOOD parts from one product will neutralize the BAD parts from another product, and vice-versa.
This way, instead of ending up with ONE annuity product from a questionably rated insurance company (like we see happen all the time in the current annuity marketplace) and only getting a level income stream with no inflation protection and no preservation of principal at the other end.
Instead, you end up with a diversified or "laddered" annuity portfolio split among multiple highly rated companies, with an income stream that automatically gets bigger over time AND you get to preserve your lump sum principal along the way!
“Because no one who ever wanted to buy a drill really
wanted the drill…what they wanted was a hole!”
Ever heard that expression?
Well, we believe that when most people say they are interested in an annuity (the drill), what they really mean is that they want to find a better way to protect their money, or grow it, or generate retirement income, or preserve their principal, or maybe all of those at the same time (the hole)...
...Do those desired results sounds familiar?
The problem is, most annuity websites only offer basic information about "drills" and not nearly enough good information about "making holes."
OK, just so that you don’t think we’ve lost our minds…what we are trying to say is that there is a lot of information already out there regarding what annuities are and how they work.
However, there is very little information out there about how to use annuities correctly from a real financial planning perspective in order to best accomplish the growth, income, and preservation of principal goals that are most important to you.
Does that make sense?
The result is that a lot of people are being sold products instead of legitimate financial plans or strategies that can actually accomplish their most pressing needs, until now…
The good news is that there is a little-known, smarter and mathematically optimized strategy that few investors and even advisers are aware of…