Annuities can be compared to pensions that guarantee a specific amount of money each and every month, for as long as you live. This predictable source of income can be attractive, however, there are three key reasons we have not encouraged our clients to make most annuities part of their LASER-focused financial portfolio.
Three Key Reasons
More than 99% of annuities in the marketplace don’t meet our strict requirements for a LASER-focused financial vehicle. Here’s why:
Many annuities (called variable annuities) have your principal at risk. If the market performs well they have great upsides, but during down markets your money can be lost. We refuse to recommend products that don’t offer adequate safety. The current and future economic outlook demands retirement vehicles that protect and secure your assets, not those that put you at risk.
While annuities have guaranteed income-for-life features, most annuities have historically low rates of return. Low rates of return can often drain money, in part due to inflation eating away at future buying power.
Many annuities are in essence high-cost products. While retirees have purchased annuities in spite of these costs in exchange for guaranteed income-for-life benefits, we could never quite convince ourselves that this was best for our clients.
A unique type of indexed annuity has recently debuted, available exclusively to select financial professionals across the country. This is the annuity we can get behind, as it addresses all three of our major concerns.
Safety – Because this annuity uses indexing (vs. a variable strategy), y our money is protected from loss due to market volatility.
Rate of Return – With indexing, your money can grow with upturns in the market, while being protected from the downturns. This can lead to more predictable rates of return.
We have helped many highly successful people accumulate their money safely, earning predictable, tax-free rates of return, with historical annual average rates of 5–10%. What that means is, when they retire, every $1 million dollars they have accumulated can generate $70,000 – $100,000 per year of tax-free income (aka tax free retirement), without depleting the principal on their nest egg!
