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September 04, 2012 at 11:12 AM
There are a lot of myths about annuities. Some are outdated and others are flat-out wrong. Similar to how today’s cars have features and options that were not available 20 years ago, annuities have evolved from what they were years ago.
Annuities are becoming more compelling because of two simple reasons. First, banks and insurance companies are the only two institutions that offer protection with certainty and definition. Second, people want to protect their life savings from the drama on Wall Street. Anyone who’s suffered a financial loss in the past few years needs to know that annuities can be an important part of a solid retirement plan.
Annuities protect a portion of a client’s retirement savings from market loss and ensure a percentage of their income lasts as long as they do. Today’s retirees or soon-to-be retirees actually prefer protection over growth. In my practice here in California clients are answering the question, “Do you still trust Wall Street?” the same way. “Not like I one did…”
Let’s take a closer look at some common myths about annuities and how they actually work.
Myth 1 “Annuities are too complicated.”
The truth is, even though the mathematics behind an annuity may seem complicated as a concept, annuities are not rocket science. You give money to an insurance company and in return they give you a guaranteeeither a guaranteed interest rate, guaranteed income for a specified period of time, or even guaranteed income for life.
Myth 2 “Annuities have hidden expenses.”
