Turn on the radio, pick up the newspaper, google the word “Annuity,” and sit back and think to yourself, what in the world is going on here?
Huge firms and stockbrokers all build fear and loathing around this ominous word “Annuity.”
Have you ever thought about the definition of the word Annuity? What is it exactly? Webster’s dictionary defines it as A form of insurance or investment entitling the investor to a series of annual sums.
Did you know there are over five different types of Annuities? Did you know that they all have various features, different strengths, and weaknesses? For someone in retirement, an Annuity may be the only financial vehicle that can offer precisely what benefits are essential.
Would you be surprised to find out that annuities have existed since Roman times? This financial tool has been in existence in the United States since 1812. Just like technology has evolved from electronics to Aerospace, Annuities continue to evolve and offer new and unique strategies for today’s investors. On my radio show, we talk about an account that can protect and grow your money with no market risk. It can also provide a guaranteed lifetime income that can last as long as you or your spouse are alive.
Oftentimes, listeners call in to our radio program and proclaim these claims to be “Too Good to Be True.” I often shake my head and chuckle in wonderment at how many folks have no idea that an account like this exists.
Why have so many folks never heard of these investment vehicles? Well, take a moment to think about it. Banks have no interest in educating investors on accounts like these because they want your cash in deposits the bank can use to leverage money and loan out on their terms. On the other hand, brokerage firms would rather see investments tied to accounts that pay an annual fee/revenue.
Annuities, therefore, are never marketed or availed to traditional investors through traditional investment channels. In a sea of information, good and bad, how does one even learn or educate themselves on these often complex and misunderstood financial tools?
I often tell folks that annuities are for some of your portfolio, not all of it. By learning about and selecting the proper vehicle, you can ensure growth in years where a stock index goes up, and you can protect your principal from loss in years where the market goes down. These accounts can also pay a guaranteed income stream with additional/accelerated funds for medical or long-term care events.
There are threats at every turn in retirement: Stock Market Loss, Longevity risk aka Outliving your savings, Medical spend down due to Long term care or confinement, even inflation risk. The proper annuity can address all these issues.