Alice told me she attended a retirement seminar which ended up focusing on annuities. She said ‘I really don’t understand these. They sound too good to be true.’
She was right.
She brought her bundle of information to our meeting and we reviewed it, page by page.
Alice was told she could never lose money in an annuity and the value of the annuity would go up and up. And when retired, she would receive a guaranteed income stream.
As we reviewed the material, the restrictions and costs associated with these promises became clearer and clearer to Alice.
4 Annuity Basics:
- Annuities are complicated investments. They are a combination of some sort of investment, such as mutual funds, combined together with insurance.
- Annuities can have high fees, often over 2.5%. I have seen annuities with fees over 3.5%. And with back end sales charges that can be as high as 10%. That is why they are pitched. They are profitable to the sales people.
- In many cases, if you annuitize, the monthly income stream is fixed forever. You cannot withdraw more money. So, you cannot increase the income stream as inflation increases. This is a real problem. People usually need and want more flexibility in accessing their money, especially in retirement.
- With some annuities, the annuity ends when you die. Any remaining money then belongs to the annuity company.
Are there good things about Annuities?
Yes. For certain situations annuities can be a good thing. They can offer tax advantages for non-retirement accounts. A few provide an income stream with flexibility and a very few have low fees.
The plan that Alice and I reviewed did not provide a flexible income stream and it had fees over 3.5%. It had features she didn’t need but would have to pay for.
After Alice learned more about the annuity fine print, she decided it wasn’t for her.
Know what is in it for You:
When new clients come to me having already purchased an annuity sold to them by someone else, they always say – “I don’t really understand what I have here, can you explain it to me”? They are usually surprised. And in most cases, they want out.
In my practice, I can offer low cost, flexible annuities to clients. But I rarely do.
If you are wondering if an annuity is a good thing for you, reach out and we can review.
It is all about the details.
Or, if you already have an annuity we can review your plan.
One Of My Favorite Things
My husband John and I wanted to do something fun and social so last year we decided to take dance lessons.
We enrolled in private classes at Firebeat Dance Studio in Winchester. Brad is our instructor. We love Brad. He has a great sense of humor and is fun. And a really good instructor. We have a great time. Firebeat has group classes too.
We won’t be Fred Astaire and Ginger Rogers but we can ChaCha around the dance floor with the rest of them!