"Annuities Are Bad."
This is sometimes true. Variable annuities with high fees and complex riders earned the bad press. Fixed and fixed-indexed annuities used appropriately are a different conversation.
The Legitimate Use Case
You're worried about outliving your money. A fixed annuity with a lifetime income rider says: "Give me this lump sum or these payments. I'll pay you this guaranteed income for life, no matter what the market does."
When an Annuity Is NOT the Answer
- You have plenty of retirement savings and don't need guaranteed income
- You want growth above all else
- You'd prefer to leave a large legacy
- You're under 55 and have a long investment horizon
When It IS the Answer
- You're worried about sequence-of-returns risk in early retirement
- You want at least some income that's not market-dependent
- You're behind on retirement savings and need to lock in a baseline
The Questions to Ask
- What's the surrender charge schedule?
- What's the cap or participation rate (for indexed annuities)?
- What guarantees the income - the insurance carrier's claims-paying ability. What's their AM Best rating?
- Are riders included or extra?
We walk through all four for every annuity recommendation.