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What is Your Annuity Perception (or Deception)?

Ralph Hicks

Close your eyes for a moment. Picture what your “ideal” investment would look like.

Now that you are back to reality, what did you picture? Did some of following aspects come to mind?

  • No risk to loss of principal
  • Reasonable rate of return
  • Liquidity of funds
  • Low or no investment fees
  • Diversification
  • Income ability
  • Tax deferral

For many of you, these characteristics describe exactly what the “ideal” investment would look like for you. So, my question is – why don’t you have an investment like this as a part of your portfolio? What? You don’t think it exists? Well, think again. It does exist, and millions of pre-retirees and retirees are discovering this investment strategy and adding it to their portfolio.

Many of you have relied on financial and investment advice from your peers, family, financial media, an advisor or someone who implemented your retirement account with your company years ago. You’ve probably heard that investing in long-term bonds is good for stability and income within a portfolio as you get older. For some, you’ve had a bad experience while working with an “advisor” selling you something that turned out to be nothing like what you thought it was.

With that said, all of this adds up to be just a lot of noise. And noise tends to lead you toward creating perceptions of what particular investments you may, or may not, want to place money in. For instance, if I were to tell you that the “ideal” investment that you just described to yourself was an ANNUITY, some of you might have a hard time wrapping your mind around that.

Why is that? Because over the years, you may have heard, “Annuities are bad… stay away.” So, you have decided to label all annuities as bad. Unfortunately, by doing this, you may have deprived yourself of an investment vehicle that could fit nicely in your overall portfolio and meet some of the goals you have for a particular asset.

Understanding that annuities come in a range of flavors is critical before deciding which annuity is right for you. In short, annuities can be deferred or immediate. Immediate annuities are considered income annuities, and used just for that. Deferred annuities include fixed, fixed indexed and variable, all of which will provide tax-deferred income options with the ability to accumulate. However, not all deferred annuities are created equal, each one featuring unique characteristics and potential risks.

Let me be clear, all investments have certain risks and trade-offs associated with them. And, understanding all of the trade-offs and potential risks to any investment is absolutely critical. An annuity is certainly not exempt from this rule. After all, you need to feel comfortable with your investment, and ensure the investment is aligned with your risk tolerance.

I encourage you to take some time and assess all of your assets. Determine the asset’s purpose as it relates to your goals and conclude if the current investment vehicle it’s in matches that purpose. If it is not aligned, learn the characteristics of different investment vehicles, rather than just seeking a label. Doing so will help you eliminate any potential bias you may have for, or against, any investment.

Who knows? Your “ideal” investment may have been under your nose along, and you didn’t even know it.

Finally, I encourage you to seek out a fee-based investment advisor with a fiduciary duty to put your interests above all. There are a number of great people who are willing and able to help you with your retirement planning. After all, you’ve worked hard and deserve every opportunity to obtain a financially stress-free retirement.

About the Author:

Ralph Hicks, President of Hicks Advisory Group in Albuquerque, New Mexico, has been helping individuals and families with their retirement planning, estate planning, insurance and investment needs. Ralph believes that he is not simply selling an idea or a product; rather he is providing much needed education and information on topics that are relevant to his client base. This approach, along with strong convictions of faith and integrity, has helped Ralph become a trusted advisor and friend to many.

For more information on annuities, call Ralph Hicks at 505-821-6966 or visit Hicks Advisory Group online at


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