Annuities are Bad … but are they really?
I suppose that depends…do you believe the marketing or the research?
There has been a lot of marketing dollars spent and many talking heads touting the evils of annuities.
There has been research showing where annuities are useful for specific goals.
The research audience is the financial professional. The marketing audience is much larger…
What is an annuity?
I remember sitting in a classroom full of brand-new insurance agents when our instructor asked this question at the head of the room. Many of the new agents were brave enough to guess the answer the instructor was looking for by showing off their newfound knowledge. The instructor listened quietly as we all got the answer incorrect.
He then explained that an annuity is an insurance product – nothing more, nothing less. Clients pay an insurance company in exchange for a guarantee or a promise. Those guarantees vary greatly depending on the product. They can include income, guaranteed return, paying medical bills, and too many more to mention. The devil is in the details.
If you have car insurance, you pay the insurance company. If you get in a wreck, the insurance company will (maybe) pay to repair your car.
Of course, this is when the details become very important. What coverage do you have? (What promise or guarantee are you paying the insurance company for?)
Right tool for the right job
When I want to put a nail in the wall to hang a picture, the right tool for this job is a hammer.
What if I want to redo my entire kitchen? Replace the cabinets, countertops, flooring, etc. I’d probably need more than just a hammer to get the kitchen of my dreams.
I’d also need to hire someone who knows how to redo a kitchen because I’m not so sure just me and YouTube are going to be able to give me the kitchen of my dreams.
When I hire a professional to create my dream kitchen – I really don’t care what tools he uses, I just want my dream kitchen.
What do tools and insurance products have to do with each other?
I don’t know what your dream kitchen or your dream retirement looks like. I don’t know if an annuity is right for you.
What I do know is that, as a financial professional and a self-proclaimed nerd, annuities are one of the many tools in my toolbox to help people.
I also know that when it comes to any insurance product - The devil is always in the details.
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