I have no issue with someone using *part* of their retirement savings to "buy a pension" with an SPIA (but not now because rates are so terrible). But when you start selling complicated, "guaranteed" deferred annuity products, I run the other way.
Hi Ziggy,
Actually. with a SPIA, you are giving the insurance company all control of your money for the benefit of annuitization. Do it wrong, and the company could actually end up with the bulk of your hard earned savings and nothing for the beneficiaries. That was the annuity of your father's day. Today's annuity, with income riders, keeps the control to the side of the annuity owner, and offers guarantees that mutual funds, bonds, and stocks cannot offer. It's the one vehicle that can secure your retirement without regard to the volitility of the marketplace.
I've heard the word 'complicated' plenty of times when referring to annuities. Complicated is a word that has been used so much that people automatically use it without any real reference point. Have you ever read a mutual fund prospectus? The average prospectus is 120 pages in length vs an annuity disclosure at 12 pages. Are you familiar with 12b1 fees, management fees, admin fees, 'A' shares vs. 'B' shares? These are just some of the fees in most mutual funds.
People tend to buy mutual funds and stocks without any real knowledge of what they have done, yet, they have been lead to believe that annuities are too complicated to purchase. In 2008 not one of my clients lost one dollar in their retirement savings and in 2009 they averaged a 15% return for the year. Another 9% average return for 2010. Once credited, the interest cannot be lost in future down markets.
When I go to the doctor he explains in laymans terms what is going on inside of my body. Much too complicated in technical terms. Either I trust him or I find a new doc. Same thing with mutual funds and with annuities.
My afvice to most: Don't parrot what others say. Find an advisor you can trust and ask him his opinion. By the way. most equity brokers are at a total lost as to how annuities work. Their vested interest is in what they sell - mutual funds.
The fact is. the annuity is the bedrock of the retirement pension back when pensions were made available to the employee. Many a retired person wishes that he had a pension today rather than his deflated 401k.