Annuities and Inclement Weather
As we enter the new year, many of us are coming off a near record cold snap, no matter where you live. On Christmas day I was watching the football game being played in Miami and the announcers said that the forecast high was only 42 degrees. I would have taken that here but for a subtropical place that’s pretty chilly. Lots of people reached out to ask how I was handling it and it gave me the idea to share a couple stories. Just about everyone is dealing with it to some extent so it’s something we all share.
Temperatures here were well below normal but we come to expect it each year so we are prepared for it. Houses are built with extra insulation and heavier beams to handle the snow load. Water pipes are buried four to six feet deep to keep from freezing and all run in the interior of the home to eliminate exposure to cold air. I talked to Pat and Stacey in Texas and they don’t have any of that. So when they felt 16 degrees last week it gave them a whole different set of things to deal with. Texas isn’t used to that so the extra building cost is not justified. Here it’s a requirement.
We had a nice fall this year and it seems when that happens we pay for it later. Winter came fast and hit hard. Single digit temps and solid snow storms made for some tough driving when I went to Kansas and back in November. The cold reached that far south so I never got a real break from it and things only got worse the further north I came on the return trip. It stayed that way for about a week and then in early December it warmed up for a bit. Things started melting and that set things up for being worse.
Snow melts and the water doesn’t absorb into the frozen ground. It runs across roads, driveways and parking lots, then freezes at night only to make driving more difficult. It’s easy to spot the people that aren’t from around here. The freeze/thaw cycle is pretty common around here but at one point we had some rain just before a large snowstorm and a serious cold front moved in. One friend that doesn’t live too far from me recorded a low temperature of 39 degrees below zero one morning. That’s about when we zip our coats all the way up.
Driving on the roads was like driving on a block of ice. Tire tracks packed down the snow before plows could come through so add that to the skating rink and it makes for a stressful trip to the grocery store. I have tire chains, a tow rope and power tools in my truck at all times. I prefer to be prepared to help rather than risk being stuck waiting for help. It costs extra money that most don’t spend but it’s the type of insurance that allows me to confidently travel when everyone is told to stay off the roads. I’ve pulled three people out of the ditch already so it paid off for someone.
Most people who live in the southern states don’t have to prepare for heavy snow loads and freezing pipes. Tire chains and tow ropes might never get used. What use would a person from Texas have for a winter coat? There are some simple things we take for granted that don’t occur to some to be a necessity. Yes, geographically speaking there are lots of different things we each should do to prepare for inclement weather. Even if this cold front reached more people than normal, it’s still a safe bet to move south to avoid the hassle.
What we all do have in common is the need to protect ourselves from inclement financial conditions. I spend money to ensure my comfort in cold weather and I spend money to ensure my comfort during financial storms as well. Emergency savings and life insurance at my age and stuff like long-term care and medicare supplements at your age. It all costs money except for one thing: annuities. To start with, buying an annuity is just shifting assets from one place to a safer place. Throughout this podcast and newsletter I’ve debunked annuity myths of fees, liquidity and growth so it makes sense for those who want to sleep well during financially hard times. The debate is over so I don’t want an argument but I’ll explain to anyone who doesn’t understand.
Things you spend money on to preserve comfort are a luxury and that includes annuities. But annuities don’t really cost anything because it’s just shifting your money to another account that holds your money. Asking me if I can handle the cold is like asking one of my clients whether they worry about the stock market and economy. We are all prepared for it. I’ve made sure of that.
Have a great weekend!