The Most Baffling “Negatives” about Annuities (Part One)

I was talking to a friend of mine from Florida this past winter.  She was visiting and we had an ice storm come through.  Being born and raised in South Florida, she had never had the opportunity to drive in icy conditions.  It was very difficult to explain what many people know from experience.  The thought of turning into a skid when driving on icy roads seemed very counterintuitive.  And that really makes sense…if you have never experienced it, a real positive idea would seem to be a negative.

Many people have the same misconceptions about annuities.  Many people see the surface “negative” of certain features within annuities and simply miss the positive benefits that can be offered.  So here are the top benefits of “negative” features of annuities:

  1. Annuities are Sold, Not Bought

I was listening to the radio recently and heard a consumer advocate with no experience in the financial services industry say that annuities are always sold and rarely bought.  I would slightly disagree with that conclusion since many people play the lotto, contribute to their company’s pension plan, and seek out income planning tools constantly; all examples of annuities.  However, in general, I would agree, frequently they are sold, not bought.

Nevertheless, why is that necessarily a negative?  I know we can all give examples of being sold something we did not really need.  And certainly in any circumstance, there can be dishonest people whether you are buying or selling.  But, there are ideas in this world that are not bought, not because they are not good, rather it’s because you would not know how they solved your problem to begin with.  Imagine the inventor of the drill.  People were using screw drivers and getting the job done.  Then a guy comes along and sells you on the advantages of a drill to solve problems you may have not even realized you had.  Annuities are similar.  As a society, people are living longer than ever yet are still retiring at 65.  Many boomers and seniors are just now realizing that converting some of their nest egg to an income they can never outlive can be a solution to a dilemma that may or may not have even realized you had.  Or maybe, you feel burned and leery of the stock market, but you know that the bank CD rates are never going to grow your nest egg to what you need to be able to retire.  This is another example where certain annuities can find a solution.

But there is no “Annuity Store”, next to Rosie’s Diner on Main Street.  And there is no Ebay for annuities.  This is not purchasing a can of peas, or even a bank CD or a stock.  Annuities are complex, not easily translated into layman’s terms, and uniquely structured to fit certain individuals like a glove and others not at all.  Plus, you are dealing with a nest egg couples have spent a lifetime to accumulate and therefore it is critically important to have an expert in annuities translate your needs and the features of the product into a plan that achieves your goals and explained in a way you understand.  This is why you need a financial advisor that specializes in annuities and retirement planning to sell you a plan that is tailored to your unique needs and circumstances.

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