If you are about to retire or already retired, chances are you've been approached by an Annuity Salesman. (I'm referring to after market annuities in this blog. Not a pension annuity. For info on those. Click here).
They come as fixed, variable, guaranteed, indexed, etc... but the sales pitch is usually the same. Let me guess. He/She pitches the product as no risk, safe, only get market upside, lifetime income, death benefit, etc, etc....So you are probably wondering are annuities a good investment?
Let's address that statement right now. Annuities are NOT an investment. Say it with me. Annuities are not an investment. One more time. Annuities are not an investment. Ok. Now that we are on the same page exactly what are annuities?
Annuities are an Insurance Product sold and backed by Insurance Companies. I repeat. Annuities are an Insurance Product sold and backed by Insurance Companies. Is this bad??? Not necessarily. Think of annuities like dogs. There are 100 plus different breeds of dogs. There are some very good dogs and there are some very not good dogs, but at the end of the day they are dogs.
Annuities are much the same. There are so many different types of annuities offered by so many insurance companies, that it's impossible to keep them all straight. Used in the right situation they can be helpful. But again they are not investments. They are Insurance Products.
Think of why you buy insurance for anything? You buy insurance because it transfers risk from you to the Insurance Company. That's it. Same with an Annuity. You buy one because it transfers risk from you to the Insurance Company. The Insurance Company promises you a "safe" return with no risk. Who doesn't want that? But is it a good idea for your entire retirement portfolio? The answer 99/100 times is no way!
I could write a short novel about this, but ultimately it comes down to this? Would you ever put all your eggs in one basket? That's what you are doing when you take all of your retirement and put it it an annuity.
At 80/20 Financial Services, we believe annuities can serve a place in your retirement portfolio. But not as your entire portfolio. Back to the dog analogy. Bird dogs are good for hunting birds, But would you take that same bird dog to herd cattle? Nope. Two different dogs for two unique jobs.
We will make sure you are using the right dog (annuity) for the right job (retirement portfolio).
80/20 Financial Services is an Independent Registered Financial Adviser. That means we work for our clients only and not for any specific investment or insurance products.
Have questions about annuities? Contact us today. We would be glad to help. Zero strings attached.
Thanks for reading!