Advisors’ Advice: Are Annuities Worth It?
August 1, 2019 by Bernice Napach
As advisor clients age and retire, the need for guaranteed income grows. Social Security can provide at most a few thousand dollars per retiree per month, but beyond that there are no guarantees. If an advisor perceives a gap between the income that a client needs in retirement and what that client will collect from Social Security and from savings, they might recommend an annuity to fill that gap.
“It all comes down to the client’s situation … to longevity risk and sequence of returns risk,” says Derek Tuz, partner at Aegis Financial Partners in Boulder, Colorado. “We have no idea when we’re going to die and what the market is going to do.”
Tuz is an advisor who uses annuities for certain clients to cover a portion of those clients’ income needs. Other advisors like Leon LaBrecque of Sequoia Financial avoid most annuities except single premium immediate annuities (SPIAs), which tend to be the simplest kind though not without complications or weaknesses.
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