From Legendary Financial Advisor, and Thought Leaders, Randall and Neal Richard of Richard Brothers, Financial Advisors:
Annuities are a popular option among investors, but some financial firms are critical of these products. Ken Fisher of Fisher Investments, for example, offers harsh criticism of the annuity industry as a whole. He compares annuities to Ponzi schemes, suggesting that they offer promises that are too good to be true in order to get naive investors to make a purchase. He also accuses annuity salespeople of using unscrupulous tactics to manipulate clients and pad their commission.
The criticisms of Mr. Fisher and others who dislike annuity products are harsher than they need to be. Billions of dollars have been positioned into various fixed and variable annuities, and have offered investors with many valuable benefits. It is critically important that financial advisors properly explain the benefits to investors along with recommending an appropriate amount of money to be allocated to these programs. To be clear, it is not a total solution, but can serve as an important piece to an investor’s total portfolio. It is equally an ethical issue to state broadly that annuities are bad for people, feeding into the fears that investors already have about investing in a complicated financial services marketplace. The large majority of financial advisors work in the best interest of clients.
Annuities are far from perfect and not meant for all investors. However, for some individuals, they still provide several benefits that make them a valuable asset. All investments have risks, costs, rewards, etc. and understanding how they work is outlined in the approved materials provided by the insurance companies and those who represent them. Millions of investors have received benefits from annuities.
Benefits of Annuity Products
Some of the benefits of annuity products are included: Of course, this does not act as a recommendation or representation of any specific investment in annuities. These are highlights to help you to ask the right questions and understand the general products available.
- Tax benefits- Annuities are tax-deferred, which means that the money in the account compounds each year without incurring any income tax. Taxes are paid when funds are taken out later.
- No annual contribution limit- Unlike other tax-deferred retirement options, such as IRAs or 401(k)s, annuity products don't have a contribution limit, which allows investors to put away more money each year. This is especially beneficial for older investors who need to build retirement income quickly. Also for high income earners who have not put enough away in tax deferred investments for retirement.
- Flexibility- Retirees (investors over 59 ½) can choose to take a lump-sum payment from the annuity or receive smaller, guaranteed payments on a regular basis over a period of years.
- Protection against longevity risk - With people living longer than ever before, other sources of retirement income are already overburdened. Annuities provide a safe, guaranteed source of retirement income for investors worried about the effects of longevity on their other sources of income during retirement. Unlike tax deferred Ira’s and 401K’s, investors do not have to take a required minimum distribution out and pay taxes on the funds at 70 ½.
- Protection against investment volatility - Many annuities offer retirees a guaranteed stream of income for the remainder of their lives, which helps them sleep better at night, especially when other investments seem volatile or uncertain. Investors who have an annuity are less likely to panic over market fluctuations or make rash investment decisions out of fear.
Making a Decision
Looking for a quick solution for all of your financial planning and retirement planning needs? An annuity is not the answer. An annuity is considered a long-term investment oftentimes held for 10+ years.
Be sure to research your options carefully and take the time to learn about the benefits. Receiving a second opinion prior to investing is a great idea even if there is a cost involved for the person’s time. Also, make sure you’re working with a financial professional who is willing to sit down and help you fully understand the product. An advisor who acts as a fiduciary - keeping your best interest in mind at all times - will guide you to make the right decision.
At Richard Brothers Financial Advisors, investors can learn about the benefits and drawbacks of this type of investment or any other type of investment products. We encourage involvement from your team of financial professional: CPA, Attorney, Insurance Agent and alike.
Professionals that work together as a team get the most for people and their families. Spending time scaring innocent people so that you can switch them into buying your book, video or product is non-sense
Note: If professionals are not doing what is right for people, our world class regulatory agencies at a state and federal level will find out who they are and take appropriate action.
Worried about outliving your money? Request a free, 30-minute consultation with Richard Brothers and start planning for retirement.
Richard Brothers Financial Advisors