Most people approach the use of annuities in retirement planning with some sort of bias based on what they heard or read elsewhere. There’s no shortage of negative opinions but you’ve got to consider where those opinions come from. Typically you’re getting a perspective from someone who is in the business to sell you something else.
What do you think a Ford salesman is going to say when you mention the possibility of buying a Chevy?
It may come as a surprise to most people when they learn that I didn’t always like annuities either. I didn’t like how annuities were sold so I learned to find the weak spots in a sales pitch and that would usually expose an under-performing product. But I also found plenty of common features that looked very reasonable.
I have come to the conclusion that the cons of annuities are simply chosen add-ons that don’t have to come with a standard contract. So avoiding the negative features comes down to how you use the annuity.
If a salesman doesn’t know how to use an annuity the right way then you will likely end up with an annuity that doesn’t work so well. Let’s take a look at some of the cons of annuities so you know what to avoid.
The two biggest cons of annuities…
These are getting kind of tired but are still widely recognized as the biggest problems.
Fees: You will be told that fees are too high and often undisclosed so they come as a surprise and work to eliminate any possibility of yield. Fees are directly related to options within a contract. That means you choose whether you pay for an additional benefit. An annuity without additional riders doesn’t have fees so it’s easy to eliminate the problem. I don’t like fees and can show you how to use an annuity efficiently without paying extra for it.
Losing Control: Most people are told that by using an annuity you are losing control of your money forever. That is a general complaint about one specific kind of annuity. And since lifetime income is not a very good deal then you have no need to lock money into a contract that pays for life. If a plan is built properly you can get the same benefit without committing funds for life. Less creative people have a hard time seeing the potential so you are likely going to continue to hear this.
Don’t ever forget this: You only pay fees if you want to and there are plenty of ways to use an annuity and maintain control of your assets.
By debunking the two complaints above you can disregard 95% of the information you’ll hear about annuities that is negative. There is more to it if you want to get technical but this really is about as simple as it needs to be.
Most people who don’t like annuities only say that because they are selling something else. What you do with your retirement assets is your choice so you need to be able to logically compare the advice you get.
Annuities are just an option for protecting assets. You have other options as well but the annuity will have some clear advantages, depending on what you are trying to do. A good strategy is more important than anything and that’s the right place to start.
Go ahead and signup to receive the reports if you’d like to learn more or give me a call if you’d like to talk about how an annuity can improve your retirement plan.
Bryan J. Anderson