{"id":20622,"date":"2023-08-25T21:34:32","date_gmt":"2023-08-25T21:34:32","guid":{"rendered":"https:\/\/www.thinkadvisor.com\/2023\/08\/25\/what-are-the-worst-annuities\/"},"modified":"2023-08-25T21:34:32","modified_gmt":"2023-08-25T21:34:32","slug":"what-are-the-worst-annuities","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2023\/08\/25\/what-are-the-worst-annuities\/","title":{"rendered":"What Are the Worst Annuities?"},"content":{"rendered":"<div class=\"media_block\"><a href=\"https:\/\/feeds.feedblitz.com\/-\/789587996\/0\/thinkadvisor\/\"><img decoding=\"async\" src=\"https:\/\/images.thinkadvisor.com\/contrib\/content\/uploads\/sites\/415\/2023\/08\/2023-8-25-unhappy-couple_Shutterstock_640x640.jpg\" class=\"media_thumbnail\"><\/a><\/div>\n<div><img decoding=\"async\" src=\"https:\/\/images.thinkadvisor.com\/contrib\/content\/uploads\/sites\/415\/2023\/08\/2023-8-25-unhappy-couple_Shutterstock_640x640.jpg\" class=\"ff-og-image-inserted\"><\/div>\n<div class=\"the-advisor bullet-summary\">\n<h3>What You Need to Know<\/h3>\n<ul>\n<li>Some advisors love variable annuities.<\/li>\n<li>Some like single-premium immediate annuities.<\/li>\n<li>The author has a different perspective.<\/li>\n<\/ul>\n<\/div>\n<p id=\"first-para\">Having a philosophy for knowing the difference between the best and worst annuities is crucial if you\u2019re helping retirees plan for retirement.<\/p>\n<p>Products on the market come with unique features.<\/p>\n<p>Some are better than others or make more sense for different financial situations.<\/p>\n<p>Here\u2019s my position: For my own retirement income planning clients, an annuity must guarantee 100% safety of principle and, ideally, provide some income guarantees.<\/p>\n<p>Other financial professionals may have different clients, and they may see things differently.<\/p>\n<p>There are some scenarios where variable products can be useful for a client, depending on the client\u2019s risk tolerance, savings rate, and amount of liquid assets available to cover emergencies and income needs that could arise later on.<\/p>\n<p>This article is not meant to push you away from selling the right variable products to the right clients.<\/p>\n<p>But here are some things I look for when I\u2019m evaluating annuities for my own clients, who tend to have a low level of tolerance for investment risk and not a lot of time or extra assets they can use to cope with investment losses.<\/p>\n<h2>1. Annuities Your Client Has No Control Over<\/h2>\n<p>One of the worst annuities for clients who want complete control of their investment is the single-premium immediate annuity.<\/p>\n<p>An immediate annuity has a retiree use a lump-sum contribution to annuitize their savings.<\/p>\n<p>This means the clients convert their savings into a stream of payments to support their retirement fund.<\/p>\n<p>A single-premium immediate annuity might be a good thing if the owner of the contract has no heirs, owns a lot of liquid assets, and is only focused on locking in the highest income possible.<\/p>\n<p>However, retirees may not be able to reverse the SPIA purchase process or get to the savings if they ever need the money back.<\/p>\n<p>This investment option also tends to earn low interest rates and most likely won\u2019t provide a death benefit for the beneficiaries.<\/p>\n<p>A better option for most of my clients is a deferred annuity with a lifetime income rider.<\/p>\n<p>It offers more flexibility and earns interest, and beneficiaries receive the balance in a lump sum.<\/p>\n<h2>2. Annuities That Lose Money<\/h2>\n<p>My feeling is that the best thing about an annuity is getting a fixed investment option that generates long-term income.<\/p>\n<p>That\u2019s why, in my opinion, advisors should generally steer clear of annuities that lose money due to stock market <a href=\"https:\/\/www.finra.org\/investors\/investing\/investing-basics\/volatility\" target=\"_blank\" rel=\"noopener\">volatility<\/a>, especially for retirees with little savings.<\/p>\n<p>Traditional variable annuities and registered index-linked annuities are two of the most common \u201closing\u201d annuities.<\/p>\n<p>When your clients own those types of annuities without adding benefits guarantee options, the market\u2019s up-and-down movement can cause the payout to increase or decrease unpredictably.<\/p>\n<p>I believe that buying an annuity without principal or income guarantees defeats the purpose of guaranteed savings.<\/p>\n<p>To be fair, in certain cases, a variable product may be appropriate, such as when a client has plenty of emergency savings, as well as some type of guaranteed income plan to cover future expenses if things go south with their other investments.<\/p>\n<p>But most of my retired clients want to avoid taking on such high risks when they\u2019re retired.<\/p>\n<p>Fixed and fixed indexed annuities aren\u2019t affected by stock market volatility.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What You Need to Know Some advisors love variable annuities. Some like single-premium immediate annuities. The author has a different perspective. Having a philosophy for knowing the difference between the best and worst annuities&#46;&#46;&#46;<\/p>\n","protected":false},"author":1,"featured_media":20623,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[1],"jetpack_featured_media_url":"https:\/\/blog.lifeinsurance-orleans.ca\/wp-content\/uploads\/2023\/08\/what-are-the-worst-annuities.jpg","_links":{"self":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/20622"}],"collection":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/comments?post=20622"}],"version-history":[{"count":0,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/20622\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media\/20623"}],"wp:attachment":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media?parent=20622"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/categories?post=20622"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/tags?post=20622"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}