Buying The Cheapest Annuity & Predictable Regret
Everybody worked hard to get to retirement. Some have been more blessed than others but the level of success depends heavily on inputs. One of the wealthiest clients I have was a garbage truck driver and I’ve seen several doctors and business executives who sure lived a classy life but don’t have the money to sustain it in retirement. Habits are what make or break it and regardless of where you are on the spectrum, those who can retire all want the best.
The more successful we become the more nice things we enjoy. It is not all about material possessions. Fancy things are nice but time is the most valuable commodity. Retirement should come without worry so you can spend your time on the things that make your life better. Do you really want to spend it concerned about the safety of your money?
I’ve talked a lot about finding the best deal you can get. Be efficient with your money so you’ve got room for all the extras. But there’s a fine line between good quality and excellent quality. The longer you are attached to an insurance company, the higher quality you should require. This is most applicable to income products that will last the rest of your life but it’s important for short-term parking spots as well. This is a good follow up to the Sentinel Security podcast done just a few weeks ago and something that every first time buyer should be aware of.
When I ran that podcast, several people with annuities from Sentinel Security got in touch with me. I’ve told all of them to just stay put and not fall for a scare tactic from any greedy agents. They have what they have and should ride it out. One case in particular with Jack was a guaranteed income deal that was still in deferral for a few more years before the owners planned to take lifetime income. It is a substantial amount of money so justifiably is of great concern to these people.
Late last year, I released a podcast on the rules regarding an early surrender of an annuity. In short, you need to be able to determine that the new contract has an objective benefit over the old contract. Otherwise, the new insurance company won’t accept the replacement. In this case with Sentinel Security it was really close but the new contract would require a slightly longer deferral to match the income of the existing contract. Jack has a choice to make and I think they are rightfully sticking with what they have. At certain times it seemed pretty likely that they’d swap the contracts and get something new with a more solid company.
Jack was reasonably upset and didn’t want to worry about his hard-earned money getting cut. I told him, “taking the guaranteed income in a few years is one thing, but you’ll have to worry about this company for the rest of your life.”
It’s not a decision that anyone wants to be faced with. And looking back, he clearly would have done just as well had he bought it from a different company a couple of years ago. But nothing can change what’s already in place so I don’t want to focus on that too much. For anyone, starting out, however, why risk it? You might get a little less income or the income goal you have might cost a little bit more but we’re talking about one of the largest financial decisions you’ll ever make. Get something that’s really damn good.
Everyone who buys an annuity from me has seen several options and I suggest that at the very least. We often skip the highest payout and take a little less for an incredibly stable company. You all work hard for the money you have. When you spend it I’m sure you like to get something nice. I sure as hell do because I’ve worked hard for what I have. My mules are the best you can get, top of the line fly fishing rods, hunting rifles, and cowboy boots. You name it, I buy nice stuff. I’m sure you do as well. We have all done well and we buy nice things. Why wouldn’t you buy a nice annuity?
Bryan
Watch Episode 170: Buying The Cheapest Annuity & Predictable Regret
Download Episode 170 – Buying The Cheapest Annuity & Predictable Regret on Apple Podcast
Last Updated on February 21, 2025 by Bryan Anderson
