Are You Outliving Your Assets?
Posted on June 4, 2014
People often remember the negative things they see more than the positive. It is just a fact of life. There has been negative press coverage of the annuity market and people think that the coverage they see is the truth.
But as we all know, there are 2 sides to every story and then the truth.
Myself, I strongly believe in the positive aspects of annuities. They are good, they work and they will stick around.
So what is so great about annuities?
– They keep you from outliving your assets. People generally underestimate their life span and typically live much longer then they thought they would. Annuities have kept some people from living in poverty.
– They are flexible and can be structured to meet your needs. You can structure your annuity purchase to provide income when you need it (now) and security for your family later.
– They are secure. Despite economic problems most people agree there is relatively little chance of the providers defaulting and not being rescued by the financial industry.
– Annuities are exactly what you think they are. There can be no mistake, you know exactly what you will get and when.
What about that negativity floating around? Any truth to that?
First we will go over the issue of pricing. We are told constantly that annuities are too expensive. Those who say they are too expensive are making assumptions about the future longevity of the buyer and future investment returns that may or may not be true. They are also making a judgment about the cost and value of security. The cost of annuities is affected by the level of capital needed to back the contract but without that capital the possibility of default by the payer increases. What value would you put on the security of your pension?
Next is the issue of the annuity market. The annuity market should be as close to a perfect market as you can get. In the absence of any security issue, with an underpinning insurance arrangement (albeit untested) and with plenty of information about the price, economic theory would suggest prices be driven by the unstoppable forces of supply and demand.
A third issue to consider is that people will often buy a level, single life pension rather than a lower initial pension with increases and a spouse’s benefit. Here the issue is whether people are making the right financial decisions. This isn’t a problem of the annuity market, it is an issue of financial education.
With good financial education and clear communication the annuity market is well positioned to serve retirees well. We need to re-enforce the good things annuities offer and help people make the right decision (which may be to stay where they are and have a level single life pension).
If you are retiring soon what help do you need? I would love to chat with you more on this topic if you are interested. Please don’t hesitate to contact me to set up a consult so we can go over your specific questions and see what a good fit would be to reach your goals.
John Bulbrook, Bulbrook Drislane – IN-FORCE ™ Secondary Market, Finance and Investments, Secondary Market, Annuities, Fixed Term Annuities, Life Insurance, Structured Settlements, Previously Owned Annuities, Pre Owned Annuities, Immediate Annuities, Factored Structured, Settlement Secondary Market Annuity, Aftermarket annuity, Inforce fixed term annuities, Inforce fixed term annuity, Inforce annuity, Deferred Variable Annuity, Inherited Annuity, Equity Annuities, Straight Life Annuity, Non Qualified Annuity, Mutual Fund Settlement, 20 Year Annuity, 10 Year Annuity, 5 Year Annuity – Click here for his Facebook,Twitter, LinkedIn, Google Plus