What Fuels The Fear Of Annuities
I’ve thought about this long and hard: Why are people afraid of annuities?
In my experience I have found that most fears come from a misunderstanding or lack of knowledge. When it comes to annuities, the misinformation is rampant.
Here’s what I think is at the root of the fear. Most people don’t understand the purpose of an annuity, and as a result of this, people get sold the wrong kind of annuity (there have been lawsuits because of this).
The truth is that an annuity can be a powerful tool in retirement.
The analogy that I like to use is that annuities are like dogs. You may be a dog lover, however, dog types range from Chihuahuas to Great Danes and not every dog will be suited to you and your lifestyle. You have to be very careful when deciding what dog will be the right match for you. And, there will be cases when some people will not be served by having a dog at all! Maybe a cat will be more suitable!
It might help when you consider that an annuity can be looked at as the exact opposite of a life insurance policy. Most people understand that a life insurance policy is based on and designed around the insured’s death, at which time proceeds will be paid out. An annuity is based on and designed around life by potentially providing the annuitant income for a predetermined period of time. And, that income can help cover long-term care costs. In other words, a life insurance policy is needed in case you die while an annuity is needed in case you live – and especially in the case that you live longer than you expected. However, there are even annuities that if not used for lifetime income can provide a death benefit to your heirs.
Annuity suitability questions are such a large part of annuity applications in order to protect consumers.
There are many factors that we at Red Feather Financial consider when recommending an annuity including age, annual income, financial objectives, and risk tolerance.
If you are considering an annuity but aren’t sure if one would be in your best interest, give us a call and we will help explore your needs and determine how your financial goals might best be served.