“A true annuity specialist is someone who helps you decide the safe money decision that feels right to you, even if that decision is to purchase nothing at all.”- Ed Hochard.
All financial choices are, at their heart, personal decisions based on an investor’s unique situation, risk tolerance, and retirement goals. The decision to purchase an annuity is no exception. However, no matter what you’ve read in company marketing pieces or heard from salespeople, annuities are not suitable for everyone. Even if you think an annuity will fit nicely into your portfolio, there is no such thing as the “perfect” annuity. Nor is there one specific age at which everyone should purchase an annuity contract.
Should you be thinking about annuities at all?
Don’t succumb to pressure from someone trying to sell you any safe money product, even if that person is a trusted advisor or friend. Instead, before considering any financial move, you need to spend some time with yourself, clarifying your needs and goals and being honest about your risk tolerance.
Ask yourself some key questions such as:
- What do I most desire- guaranteed income or long-term growth?
- Realistically, how many more years of work do I have?
- Is protection of my principle investment vital to me?
- What other income streams will I have when I retire?
- Have I considered the personal and financial changes that accompany retirement?
- How much risk can I handle?
- Do I understand the basics of how annuities work?
- Do I require more flexibility and liquidity in my portfolio?
- Am I worried about outliving my retirement savings?
- Are there other financial products that might work better for me?
- How much money will I need to maintain my current lifestyle once I no longer work?
- Will having at least one stream of predictable, reliable income when I retire alleviate my stress?
- Do I want or need to leave a legacy for my spouse or other loved ones?
- Is the potential need for long-term care of concern to me?
These questions will form the basis for the further exploration of your safe money options. When the time comes to sit down with an advisor, write the questions down, along with your responses, and have them ready. Doing so will help make the buying process more efficient and assist your agent in selecting, customizing, and personalizing the annuity or other product.
The bottom line: Annuities are somewhat complicated financial tools that are not suited for everyone. However, for people who want protection of principle, contractually guaranteed income for life, and legacy creation, an annuity can be a practical component of their retirement matrix. If you are thinking about purchasing an annuity, you must do your due diligence and achieve clarity about how these powerful financial tools can protect and grow wealth.