We’ve been touting this for years. Boomers are going to need income. It is the number one concern of all boomers, and if it isn’t, it should be. A reasonably healthy 65 year old couple has more than a 50% chance that at least one partner will live beyond age 90. A single male has about a 35% chance, and a single woman, a 45% chance. That’s at least 25 years or more after retirement that income will be needed. And, oh, by the way, we haven’t even mentioned the significant impact inflation, tax increases, or health care will have on that monthly nut you will need to crack to cover your basic needs, like food, clothing, shelter and yes, medications. If you’re going to live that long, there is a good possibility that you’ll not be in 100% perfect tip-top shape.
I was so shocked to read a recent article in the Wall Street Journal, March 8, 2011 titled “Making the Case to Buy an Annuity.” Wall Street has been bashing annuities for years - remember, most stock brokers do not have the necessary licenses , training, or credentials to offer them to you. If there is nothing in it for them, why would they recommend them. Also, since an annuity is meant to be left alone to do its job, create present or future guaranteed income, and tax advantages, it not a financial instrument that is meant to be sold, cashed in or traded. Do you get what I’m saying?
Well I am so happy to see Wall Street finally recognizing the importance and the value of having annuities as a “foundation” of a good retirement plan. But once again, they did not tell the whole story. They spoke of only two kinds of annuities; an immediate annuity, which works like a pension- trade a sum of money for a period of guaranteed payments, and of course they would tout a variable annuity, which invests in, what else, mutual funds! They never mentioned one of the most popular annuities today: a fixed indexed annuity with guaranteed income riders. One might say that this type is the best of both worlds. Your principle is guaranteed (unlike
a variable), and only your interest is variable as it can be allocated to either a guaranteed fixed rate, usually better than a CD, or it can be linked to various indexes like the Dow or commonly the S & P. So, you can have the potential for growth, with none of the downside risk. In addition, you don’t have all the hidden fees associated with variable annuities.
In closing, each individual should work with an advisor who is competent and knowledgeable and not limited to one company’s products. Remember, it’s about what is best for you, not them, and each of you has your own unique situation, risk tolerance, and income needs.
WE LISTEN. We’re here to help if you need us.
-Lady Fi
Kathy
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