The Basics on Annuities

Today I wanted to introduce a video called the “Basics on Annuities”. Annuities are very misunderstood products. Most people see them as a product where you lose some level of control, and to some extent that is the case, but in exchange for losing control, you gain a guaranteed income for life*. There is so much going on that makes it imperative for people to be thinking about and planning for how they are going to retire; how they are going to generate a guaranteed income for life.

Years ago, people would get pensions from their companies called “defined benefit pensions” where they worked to age 65 and then from then had a guaranteed check for the rest of their lives. Annuities can do the same thing. You put away money in the annuities. In the Deferred phase, the money grows. When you retire you enter the Income phase, which generates guaranteed income for life.

These fixed annuities can be an important aspect of any retirement plan because of numerous factors, including:

1. Deflation – With interest rates being very low, people who want to be conservative can’t generate a large amount of income from a pool of assets.
2. People are living longer and longer – The joint life expectancy of a healthy 65-year-old couple is approximately 30 years, which means that there is a very high possibility that one person will still be around 30 years later. How do you generate income for 30 years?

The more money you withdraw from the portfolio, the greater the risk that that portfolio will run out of money, but not with an annuity. Annuities guarantee income for life and that’s why they should be considered as part of your overall retirement plan.

Enjoy this short, two minute video on fixed annuities and let us know if there is anything we can do to help educate you on how annuities might be something to be considered as part of your retirement plan.

* Guarantees subject to claims paying ability of the issuer.