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September 06, 2019 at 05:23 PM
Three times in the past week I came across articles in the financial press that mischaracterized what annuities are, do, and the role they play in retirement planning.
These were not intentionally misleading rants such as we often see flipping channels on late night cable or falling out of our junk mail. Nor were they the efforts of a third-year assistant-editor in an east-nowhere community weekly. These respected financial services publications had simply stepped into a repeated narrative that is simply wrong.
(Related: Where Individual Annuities Fit in the Retirement Pie)
Perhaps not surprising as the regulatory collective talks in circles with a similar lack of understanding of annuities — particularly guaranteed fixed annuities.
In one instance, the market share of annuities, which are specific insurance products, was contrasted to that of various tax environments which are regulatory manipulations of the tax code in pretext of achieving some broader social goal. That article questioned “What percentage of retirement accounts were in IRAs, and a few other tax environments, as opposed to Individual annuities?”
Another publication asked “What percentage of the services provided by your financial advisor are devoted to “Retirement income planning, estate planning, etc. as opposed to annuities?”
In both of those articles annuities, specific insurance products, -the orange — were compared to a group of apples — IRAs, 401(k)’s, retirement income planning, estate planning, and household budgeting, etc.
That annuities would be identified by financial advisors as somehow separate from “retirement income planning” or IRAs shines a bright light on a stunning lack of understanding about what annuities are and do. How could operating in the client’s “best interest” ever overlook, separate, or diminish the role of annuities in retirement income planning?
At a typical retirement age, annuities provide more secure lifetime income than any other financial product or strategy. The number one concern of retirees is having enough income that last their entire life. Speaking very broadly, guaranteed fixed annuities can provide a specific sustainable lifetime income level for about two-thirds the amount of money required by other approaches or products. And the results are guaranteed. For life.
