It’s time to set the record straight. After hearing this in the vast majority of my meetings so far this year I have realized that the industry mantra has permeated the subconscious of most retirees. Since my strategies focus on how to enhance performance in comparison to lifetime income products, I often take for granted that people who find me are looking for an alternative.
The traditional approach of using guaranteed income to cover basic needs in retirement is not the only way to go and I pointed that out several weeks ago when I wrote about The Problem with Guaranteed Lifetime Income. But the point still seems to be not getting through because people keep saying, “I thought annuities were only for income.”
So if you are shopping for the highest payout rate or trying to find a way to game the numbers, I’m sorry to tell you that I’ve already done it. From immediate annuities to variable I’ve seen them all and know exactly where each one is the right fit. The goal is to compress the research process so you don’t spend as much time trying to find the answer as I did.
But apparently I have not put enough emphasis on one detail that is fundamental to the search for the best retirement plan. Annuities are not just for income. Annuities are for protection.
Variable annuities will protect you from taxes…
Fixed and index annuities protect you from market volatility…
And income annuities protect you from longevity…
Most people are looking to produce income so all products have been given components that allow for guaranteed income in addition to the core benefit each provides. That’s right, income benefits were added to most annuities you will see which means something existed in the contract before income was there. That’s where I focus my attention because the core benefit is where you’ll find the best use.
Really it’s all about longevity risk. That’s the risk of outliving your assets because of unknown life expectancy. Providing income in retirement is all about insurance and good insurance is expensive. That’s exactly why guaranteed income may not be the best deal. If you’ve saved enough for retirement you can avoid the steep cost of insurance and worry more about true profit.
Instead focus on safety, yield, liquidity and a shorter contract commitment so you have flexibility to make changes to your plan. The aforementioned benefits are all things an annuity can do without a fee or lifetime commitment. It’s not about income, it’s about protection.
The proof of this approach goes back to my “Five Keys of Retirement”. It’s the foundation of the Flex Strategy that shows how focusing on a single goal in retirement will limit your output and future planning options.
The Five Keys Are:
Decreasing Market Volatility
Mitigating the Effects of Inflation
Control of Your Assets
Leaving a Legacy
The guaranteed income only approach is going to leave you exposed in certain areas. Many of you might remember the green thumbs up and red thumbs down. It’s what I used as a graphic in the webinar to show how certain retirement strategies help plan for the five keys. Most traditional plans and products show deficiency in two or more areas. The goal is create a plan with five green thumbs up so you know all the risks have been eliminated.
Remember that an annuity is not just for income. The basic benefits provide what most people need and do so without the cost and time commitment of expensive insurance.
The traditional income approach works for some people but not others. My approach works for people who want or need to produce more and keep control of their assets. If I send you a proposal it means I have looked at all the other options and know what I’m showing you is the best. If you’d like to revisit our previous discussions about your plan then please reach out.
Have a nice weekend…