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August 31, 2009 at 08:00 PM
Buying a fixed annuity is a virtuous decision. The consumer is saying they do not want to gamble with their principal and so they have placed it where it will be safe and provide a nest egg or lifelong income, helping them to avoid becoming a burden on their children.
Think of an annuity purchase as a supreme exercise in self-control today to protect tomorrow’s self-interest. It is the financial world’s equivalent of the two-mile morning jog, eating the salad instead of the sundae, or watching PBS instead of E!
But virtue isn’t usually fun because it goes against our impulse for immediate gratification, so often we will reward ourselves for being virtuous by treating ourselves to a little vice. Consumers need to be told that not only is buying an annuity a virtuous decision, but that it is so virtuous it will allow them to be a little naughty.
Case study No. 1:
A couple may have $75,000 sitting in a 2 percent certificate of deposit. They would like to take a little cruise but the cost of the cruise would eat up a year’s interest.
