You Have to Want an Annuity
The idea of annuities being sold rather than bought has been something of a criticism from financial journalists who are being paid by major investment institutions. Forums like the Motley Fool and Bogleheads picked it up and plenty of advisors who would prefer to sell you something else like the saying as well. Take your advice from whomever you like but realize that a lot of the people handing out recommendations are hiding behind a screen. I’m here online, ready for a good discussion and open to a debate with anyone who disagrees with me.
It all comes down to sales and I’m just trying to organize the information for everyone. I can see where the opposing viewpoints are coming from but nothing is 100% certain. Annuities are quite often the best option, no matter what anyone else says. I can make a solid case for everyone using an annuity in some way. There are so many options and applications that anyone can benefit from something in the market. But that doesn’t mean everyone wants an annuity.
This comes up a lot because so many advisors take a sales first approach. A retired person comes into a seminar and they’ll do anything to get you to buy their favorite product. That’s often when people find me and the first thing I have to figure out is whether they even want one. Slowly but surely that has been my number one goal.
I started thinking about this newsletter on a backcountry trip with a couple of friends at the end of June. As mentioned in Episode 43: The Best Annuity Training Possible, I learned to work well with people of retirement age and that has helped me in business for the past 20 years. It also means that several of my friends are in your age bracket. These two guys are 75 and 63 years old respectively. One just sold a business he spent building for the past 45 years and the other is about to retire as the president of a large company in Montana. Both have been incredibly successful and happen to be accomplished outdoorsmen as well.
It’s fun to spend time with guys like that for lots of reasons. Intelligent conversation with guys that can more than pull their weight on an 85 mile pack trip with horses and mules. It makes me a better person in several ways and makes for a very enjoyable experience. I like to be in a position where I can learn and these guys have that covered from various angles. With each of them I have talked about retirement and finances more than once and it always ends the same way. Both of them could use an annuity but neither of them is suited for it. They’re my friends so I don’t push it.
The guy who sold a business has more money than he’ll ever be able to spend. Constant activity is what made him successful. He’s the hardest working person I’ve ever met. His money needs to be invested in things that keep him going. Real estate development and building projects require cash to withstand market cycles and that’s the type of thing he likes. You can’t just go from working 14 hours a day all your life to sitting on the couch watching Oprah. And there’s no way he’ll ever be a golfer. I know I could talk him into putting a chunk of money into an annuity but it doesn’t suit him. He may think that he wants an annuity but deep down inside he probably doesn’t
The younger guy has been saying he wants to retire for the past ten years and it’s the same story now. But I get the feeling he’s serious this time and will probably hang it up in a year or so. His engineering background makes him a pretty technical guy and portfolio performance over the past several years has shown he’s a pretty dang good market analyst as well. There’s no need for him to rush into doing anything different than what got him here. Plus, in retirement he wants to help back his son’s business and work part time there as well. Sure an annuity could help him in some way but he hasn’t made the mental transition to protecting assets. There are several different ways to do it and he’s not the annuity type.
This is not to say that business owners and engineers don’t buy annuities. I’ve sold lots of annuities to both people. But their personal preferences and lifestyle don’t match with a set and forget asset. They have both been very active and managed money well. I’m not gonna say they are cheap but I’m sure they’ve been accused of that. It’s the same for you. Lifestyle and expectations have to indicate an annuity is the right asset to use. Too many people get caught up in the negative comments about annuities and what someone else says shouldn’t matter when it comes to your retirement.
Do you even want an annuity? This will be one of the first questions I ask in most of the meetings going forward. A lot of people don’t know what they want. If you haven’t realized it yet, that is likely the most valuable part of this site. You can answer almost any question about annuities and so many people only come here because another advisor tried to sell them one. Use this site to learn about the types of annuities and how they can be used.
Ask me if you need help finding something. Don’t let all my work go to waste. You should be able to determine whether you want an annuity and if you do, I’ll make sure you buy the right one.
Bryan
EPISODE 99: YOU HAVE TO WANT AN ANNUITY
Last Updated on February 5, 2024 by Bryan Anderson
I have FIA with income rider just cooking. Should I be looking to swap for something better, since interest rates are higher and am older now?
Don – typically it’s not worth switching at this point but it is possible. It only takes a few minutes to figure out if you can do better elsewhere. You can schedule an appointment or email me the details and I’ll give you a quick answer to that question.