This is the kind of bologna that makes me despise the “credible” sources
October 3, 2023 by Sheryl J. Moore
Oh, Kiplinger– you’re on one.
Wish I knew the author of this whammy, so that I could drop a little annuity knowledge on them.
Click HERE to read “Advisory Annuities Let You Eliminate the Middlemen” on Yahoo! Finance.
Of course a well-structured retirement plan could outpace an annuity; annuities are insurance, after all. A retirement plan cannot guarantee you a paycheck for life though, without the aid of an annuity.
I’m curious. Is the fact that you HAVE to take income from an annuity a major objection? I get that you might want to avoid paying the taxes on it, but the average purchaser is 65-years old and only has $143,715 of nest egg. I’m ignorant…are these really the people that want to avoid paying taxes on their annuity distributions? #HelpASisterOut
I take issue with the complaint about insurance agents and marketing organizations taking a commission- it isn’t like the customer is explicitly paying for this. Sure, there are surrender charges on annuities, to offset the distribution expense, but surrender charges are not realized unless the client cash surrenders. And let’s face it- the client shouldn’t have to surrender if the annuity sale was suitable; no one should put 100% of their funds into an annuity.
I was amused at the suggestion that fee-based/fee-only annuities are superior. My 2020 research comparing commissioned annuities to fee’d annuities showed that fee’d annuities had an average 1.09% better cap than their commissioned brethren. That said, the average fee charged by the advisor was 1.17% annually- for life. It’s just two different ways of distributing products/being compensated- neither method is superior!
This suggestion is just plain ignorant- “[The insurer] might use a spread, in which the insurance company takes a certain percentage of any growth as their payment for guaranteeing income. Or they might use a cap, in which any growth over a given percentage is theirs to keep.” The insurance company doesn’t keep the spread or the performance over the cap in indexed annuities; these are merely functions of the options purchases the insurer makes.
Most annuities don’t have fees that are “draining your returns” either.
I’m disappointed in this one. This is the kind of bologna that makes me despise the “credible” sources of financial services information in the media. -sjm