Tune in to any financial-planning radio or television show, and you’ll hear this: “All annuities are bad. If anyone approaches you wanting to discuss annuities, turn and run in the opposite direction as fast as you can.”
Don’t be swayed by those who are shouting the same thing the loudest. When you hear this crapola being so proudly espoused, keep two things in mind:
1. These shows have sponsors. Sponsors are selling something––and they don’t want you to consider alternatives. Even when the host claims to be “independent and unbiased,” which for many of them I’m sure is actually true, the sponsors of the program are not.
2. The “experts” who toss out blanket statements about annuities are the same “experts” who have only succeeded in preparing less than 4% of Americans for retirement––and you can guess how wealthy that sliver of the population already is. If their mission is truly to prepare others for secure golden years, they’ve failed miserably.
Beware of those who claim life is black and white, leaving no room for nuance.
Here’s the truth: some annuities can be poor choices. It all depends on your financial goals. For example, “fixed” or “variable” annuities are not usually good choices. There are exceptions to that rule, but those special cases are so rare, they’re not even worth going into in this article.
Instead, we’ll focus on a new and entirely different form of annuity, known as an “indexed” annuity. An indexed annuity is not always bad. In fact, it can be extremely good for someone who wants the following:
- to grow a nest egg as quickly and predictably as possible;
- to avoid the pitfalls of the stock market;
- to create a rising income stream that they can never outlive.
I know these claims about indexed annuities are true because I’ve experienced it. I have used an indexed annuity for the last 12 years to grow my own nest egg, which has grown at twice the rate it would have sitting on the market. If I’d listened to the annuity bashers, I’d be sitting with half as much cash available for my retirement.
When I attempt to share this financial tool with anyone and the “A” word is introduced, they react like a vampire confronted by a crucifix. This actually comes in handy when I’m forced to be around someone I’d rather avoid; I simply bring up annuities, and he magically remembers he’s suddenly late for an appointment. A godsend, really.
But most of the time, I want to share what I’ve learned with others, and put succinctly, it’s this: I believe they are the best tool available today to grow a nest egg for retirement.
Annuity is just a word. The term can be traced back to Rome, where soldiers were paid annuity (annual) lifetime payments as a form of compensation for their military service.
Today, that’s really still all an annuity is. The term refers to any contract that does or can include some form of annual payment or compensation. After that condition is met, annuities can take all kinds of forms, which can either be good or bad, depending on the circumstances.
I hope I run into you in person someday, and that we can talk about annuities––indexed annuities, in particular. A growing percentage of Americans go to bed every night with the peace that only comes in knowing our financial future is secure.
Won’t you join us?
Cort Dial is the President of Cort Dial Consulting, LLC and the author of Amazon Top 10 book, Heretics to Heroes, named the #1 Business Book of 2016 by Canada’s Globe and Mail. He offers business performance coaching to corporate executives and superior financial products and expert portfolio guidance to people of all income levels.