After nearly 15 years as a financial advisor, I’ve come to accept that every prospective client who contacts me is like a snowflake: no two are ever identical. While this is true, it is also true that there are many similarities between snowflakes and prospective clients, and one of those similarities is that many profess to not being fans of annuities. Fair enough.
Recently, a CPA referred a gentleman to me who has spent nearly 30 years working for a large manufacturing company. And he’s been quite successful, accumulating around $1 million in his retirement plan. And, like many people who’ve enjoyed similar success, he’s done it “his” way, which I respect immensely.
As part of first meeting, I really wanted to gain insight into him, his concerns, his investment experiences, his likes and dislikes, and every other issue that would allow me to help him to the very best of my ability. One of the questions I asked him was “Are there any investments or strategies that you would oppose?” His response was quick and decisive: “Annuities.”
It’s not the first time I’ve heard this response, so I proceeded to ask him why. He answered, “They’re just not good investments. They’re expensive to own. They are only good for the insurance company. I just don’t like them.” A couple of things were clear. First, I appreciated that he had strong opinions. And, second, he probably had never truly been educated about how some annuities work. While his objections may have had some truth to them, every pancake–no matter how flat–has two sides.
As our discussion progressed, we came to a point where I was able to ask him an important question about his retirement income. “Don, do you have a pension?”
He responded, “Yes.”
I continued, “Tell me a little bit about it.”
Said Don, “Well, I’m going to be getting just about $2,300 a month if I take it only for my life, but there’s an option I can choose that will also protect my wife should I pass away before she does, which is likely because I’m three years older than she is.”
“How do you feel about that?” I asked.
“I absolutely love it,” replied Don.
“Why?” I queried.
“Because it’s guaranteed and I never have to worry about running out of that portion of my income,” he said. “In fact, I wish that my pension was enough to cover all of my living expenses!”
At this point, it became obvious to me that Don, like so many others who’ve walked through my door, had the same basic concern: security. And, also like many others, he was fantastic at accumulating a retirement nest egg, but was not nearly as informed about how to create sustainable, predictable income during retirement.
Why? Because, although he had convincingly expressed his disdain for annuities, had gone on to specifically say that he wanted, very much, exactly what some annuities provide: sustainable, predictable, lifetime income.
It’s during moments of realization like this that I remind myself why the job I do is so important. Through education, cooperation and good planning, we are oftentimes able to help folks like Don put together a plan that alleviates their fears and concerns, so that they can focus on exactly what retirement should be about: living.
P.S. – Please share this article with others by simply clicking on the blue social media icons at the top of your screen!
Annuity123 does not offer insurance, investment, or tax advice. You should always seek the guidance of qualified and licensed professionals concerning your personal insurance, investment, or tax matters. Annuity123 is simply a platform allowing retirement planning professionals to help educate the community on various retirement planning topics. Annuity123 does not directly support or take responsibility for ensuring the accuracy of the content displayed in the articles themselves or any feedback that may get added in the Comments section from the community.