The Truth About Buying Annuities
This chapter is from the book
This chapter is from the book
This chapter is from the book
Introduction
- To Carole, who makes all my ordinary days extraordinary. The dividends on our investment in a marriage license continue to outperform any annuity.
Saving for retirement used to be so easy. Companies provided pensions that would pay their retired workers for the rest of their lives, not to mention the fact that companies would also pay for health insurance for retirees. On top of that, there was workers’ own savings. And don’t forget the Social Security check that came in the mail every month. Retirees were set for the rest of their lives.
But times have changed. People are living longer. Baby Boomers facing retirement can expect to live considerably longer, but not necessarily healthier, lives than their parents. They will spend much more time in retirement. But few companies offer the kind of guaranteed, defined-benefit pension plan that formerly was so common. The 401(k) is king, and although it provides the potential for considerable retirement savings, it takes some effort and commitment by workers today to provide for tomorrow. As for health insurance, all too often companies are telling retirees that they are on their own. In addition, people are not saving as much as they did in the past. And even that Social Security check doesn’t seem quite as secure as it once did.
Things look rough for retirees.
But to the rescue have come insurance companies and others with a product that guarantees it will provide retirement income for the rest of your life. The product is the annuity. It is not a new idea, but it may be an idea whose time has come, with close to 2 trillion dollars now invested in all kinds of annuities.
But is this the answer to our problems?
According to H.L. Mencken, “For every problem, there is a solution that is simple, neat, and wrong.” Well, annuities are far from simple. And although they may appear neat, they are quite complicated. They also are dead wrong for many people who own them, particularly elderly purchasers of deferred variable annuities, who were sold inappropriate annuities by salespeople more interested in the high commissions that annuities bring to salespeople than in helping their clients.
But are annuities always wrong?
The answer is no. Annuities have much not to like about them, including high fees along with misleading and sometimes illusory benefits. However, this investment, which has been around since early Roman times, has evolved and continues to evolve in an effort by insurance companies and other legitimate issuers of annuities to provide secure retirement income for people. If you look hard enough, you can find lower fee annuities that provide benefits which may be tailored to your particular retirement needs.
But you need to know the truth.
Perhaps nowhere in the investment world is there more misleading and downright wrong information about an investment product than with annuities. But this book will tell you the truth. It explains, in clear and understandable language, basic information you need to know about the many different types of annuities. It tells you what the pitfalls of annuities are. It tells you about the lies and misrepresentations to avoid. It also tells you about where annuities might play a useful part in your own retirement planning, when to use them, and how to use them.
It gives you the rules in simple and concise language so that armed with this information, you can make an intelligent and confident decision as to whether annuities should be a part of your retirement planning. Oscar Wilde said, “A man who does not think for himself, does not think at all.” This book will give you the knowledge you need to make an informed decision for yourself about one of the most important issues you will face for the rest of your life—how to make your money last a lifetime.