New York Times Story on Annuities Offers More Balanced Reporting
I recently forwarded a relative of mine a link to a July 13 NY Times article on annuities by Paul Sullivan in which I was quoted about an alternative to variable annuities – buy fixed annuities over time to accomplish that same goal, and have guaranteed income in retirement. So in that article I favored one type of annuity over another.
My relative thanked me for the article, and then told me that a pop-up ad from a well- known advisor had just appeared on his screen with the headline, “I Hate Annuities”. He asked me what I thought of the statement and the advisor.
Well, here are a few of the points I made:
- There are lots of annuities on the market, some make sense and others don’t. But I wouldn’t reject the whole category. When an advisor ignores some very useful financial products, the loser could be the client.
- The categorical rejection of all annuities is generally consistent with a high risk strategy of drawdowns of capital to create retirement income.
- Too many advisors are not focused on elements that are under their control, like fees and taxes. These advisors place their bets and your money on whether they can time or beat the market.
- Certain advisors may be more appropriate for the high net worth investor who can better afford a high cost/high risk strategy.
Bottom line, just as the insurance industry could be guilty of hyping the value of all of its annuities, pay attention to advisors who use their “hate” for a financial product category as their marketing ploy by painting all annuities with the same brush. In the long run it could cost you dearly.
This same “hate all annuities” ad also appeared when I linked to a story from TIAA-CREF, which happens to offer one of the lowest cost variable annuities in the market.