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Why Annuities Are The Answer- And Are Still A Tough Sell
Retirement
Retirement Income 

Time Magazine put out a great article that speaks  to the essence of why so many investors are in a jam with their retirement plans. If you’re a regular reader or client of AnnuityAce, you’re on the right track to preventing this sad fate from striking  you. The article underscores the need for people to find guaranteed income.

The piece shows the results of a recent Blackrock study that analyzed the confidence levels of both retirees, and employees approaching retirement. See the article here.

The decline of traditional pensions and steady erosion of Social Security benefits has begun to leave most retirees without a source of guaranteed lifetime income. Plugging that hole is emerging as the most important retirement issue of our day.

How do we solve this retirement income puzzle? Annuities are the answer.  But this statistic is perhaps the most telling. 

Good luck figuring this one out. When it comes to the one sure-fire solution—immediate fixed annuities—retirees have a split personality. According to research out of Harvard, 77% of retirees wish they had locked in a guaranteed income stream when they retired and 86% say their employer should have helped them arrange one. Yet almost as many (69%) say they prefer to keep control of their retirement assets.

You can’t have it both ways. No company is going to guarantee income for life without taking control of the assets standing behind the guarantee. “We need a national conversation on this issue,” says David Laibson, a Harvard economics professor. “We need to learn more about what people want.” His comments came during a press conference for the latest BlackRock annual retirement survey, which found that retirees with a guaranteed income stream tend be most confident about their finances.

The article continues and gives some of the reasons why the logical answer is not utilized as often as it should be.

There are many reasons that retirees shun annuities. They can be confusing and some are laden with fees, and as noted people don’t like to give up control over their assets even if it means securing income for life. Another stumbling block is the low-interest rate environment, which makes annuities seem expensive.

For those of you considering annuities, you have special insider knowledge.  There’s nothing ‘low yield’ about Secondary Market Annuities.  Given their risk profile- Ultra conservative- rates of 5% to 6% are excellent long term yields.  Utilizing Secondary Market Annuities and longevity insurance, we can often secure both higher income levels AND longevity protection.  And unlike variable annuities, SMA’s have no fees and costs. Further, with definite payment streams, inheritance or legacy planning is easy.

The bulk of the BlackRock study discussed the change in confidence levels and security among retirees as the workforce shifts  from a defined benefit or pension driven retirements, to defined contribution and 401K driven retirements.  With defined benefits, longevity risk is on the plan sponsor- the employer.  But the responsibility and risk is shifted to individuals in a defined contribution world.

No matter how you solve it, securing guaranteed retirement income is an essential challenge.  Solve the problem by taking a lesson from the past, from pension and defined benefit days.  Shift the risk.  

[wpse_b_box_paper width=”87%” style=”default”]An annuity is a private pension, and when you buy an annuity, you shift longevity risk back onto the carrier.  It’s that simple.[/wpse_b_box_paper]

Don’t be among that 77% who wish they’re locked in more guaranteed income.  Take action today for that guaranteed income stream that instills the most confidence in your future.

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“For all time periods and for all portfolios, the addition of the annuity leads to a decline in the portfolio failure rates.”

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