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Annuity buyers can do better but why? • Insurance Pro Blog



What drives an annuity buyer? I mean by all the negative press about the annoyance of the annuities, what on earth do these people actually have to pull the trigger and buy an annuity?

Let's not forget all the other options available to Americans. It seems despite the negativity and the many options, people still choose to open up annuities or continue flexible premium payments to the contracts that allow them.

Annuities have what people want

The core takes annuity sums of money and make them income … guaranteed income … for people. They also provide basic security, which is supported by financial institutions with impeccable balance sheets and the ability to generate income, both investments and operational. Let us also not forget that the life insurance industry (the large category under which annuity falls) is a reputation for security and unprecedented capitalization.

We can argue as much as we want if your ability to achieve the same thing as an annuity does everything on your own and without the fees charged by the insurance company for annuity, is the truth that most will not do what is necessary for to replicate an annuity on its own.

The Americans are struggling with the concept of converting savings into income. It is a cryptic subject for most people and the anniversaries illuminate a bright light of hope and clarity directly through it.

No need to buy an annuity

I set up my personal beliefs for a moment, others have shown that your absolute need to own an annuity does not exist. Back in 201

3, Michael Kitces and Wade Pfau released an article showing that many likely overpowered the significance of single annuities (SPIAs) in retirement income creation and showed that other investment options were similar or possibly superior to SPIA.

evidence that annuities were a waste of time and money. I don't get the same feel from Kitces and Pfau when they read the paper, but they do show data that supports a position that supports avoiding annuity because you potentially can better with other investment options.

There is only one problem with any suggestion that annuity benefits the alternatives … none of the options can deliver the same guaranteed income with automation as an annuity does.

The complexity of managing own resources for income production is not a task that I personally find all that scary. I'm sure there are others out there who fall into the same camp. But I can assure you after many years of experience talking to people from all kinds of backgrounds that I am in the minority. The same applies to those who, like me, do not find the task of managing assets for income-scaring.

But you may want to be an annuity buyer

The technical expertise needed to manage your own assets to produce income is intermediate to advanced in the financial world. Managing the process of discipline is a completely different (but important) discussion.

But are there no financial advisors who can take care of it for me?

This is a reasonable question. In fact, it is an angle that some financial advisors can take in an effort to invite you to hand over all your investable money to him or her.

Once again I myself had tried to do so much when I held an investment license.

But I understand the human resources world that I am doing now, and I see the prospects of managing assets for income generation through financial products such as stocks, bonds or funds (funds, ETFs, etc.) for a number of customers who are unlikely to be able to handle most financial advisers. For this reason, many of them as standard for automation products such as annuities when it is time for a customer to start producing pension income.

I wonder if I might be gone plus or minus, but I d estimate that to get a financial advisor really managing your assets to produce income specifically for your needs you would probably need something like $ 10 million in Investable assets and being one of 15 maybe 20 customers of that advisor. All of these other customers would need to be in the same asset size for investable assets for you.

In this situation I could see an advisor who had enough money under management with few enough customers to have time to devote themselves to Data on custom income creation.

This profile is representative of a small part of the population.

So for most people who manage assets to produce income and try to beat what an annuity can do, a lot of personal work is required. For some, this is completely feasible. But for many people it is a nonstarter.

Annuity Buyers Are Not Rare

Despite what the investment industry would have you think people find many of the features offered by annuities attractive. In a recent study conducted by Jackson National Life and Insured Pension Institutions, over 85% of all respondents identified "Lifetime Income" as something where they were either something or very interested.

 JNL IRI Annuity Survey Lifetime Income The investment industry spends a lot of time and money on annuity marketing because it understands that annuities provide features that it cannot. Ken Fischer, the self-proclaimed annuity sleeve understands the same principle.

Ken spends a lot of money and time beating the war drum of annuity charges and pointing to examples of improper application of the product. What he does not mention is that if he wants to provide customers with guaranteed lifetime income sources, he has no choice but to recommend that they buy what he claims to hate.

In addition, sales data do not ship. According to WINK, sales of non-floating annuities in Q4 2018 increased by 54% compared to the fourth quarter of 2017. Sales of these annuities during this period amounted to $ 33 billion. It is $ 33 billion on newly issued fixed annuity contracts from October 1 to December 31. There are several industries in the United States that do not see the kind of money that changes hands for a whole year, says nothing in three months.

Annuity Buyers Purchs Certainty

I'm not one for small talk with strangers. If I sit next to you on an airplane, we will probably not leave the plane as new best friends. I am quite anxious to be a life insurance salesman, and I learned years ago that it was a good tool to end a conversation with someone. I use it regularly in social settings.

But sometimes there are some very talkative and friendly people will press. Perhaps it is because they have made me great and determined that I probably will not suddenly become Ned Ryerson. Or they have some strange interest in insurance. In both cases, I find myself sometimes discussing insurance (of all things) with complete strangers and a topic that often comes up in a very beneficial context is annuities.

People will ask if I make the annuity. I tell them I do, but not often (total truth).

They will then continue to tell me how they either have (or knew someone who had) and how amazing it is or how they have done some research on annuity and love the idea.

Personally, I have a very fond opinion on annuity. I do not sell a lot of annuities every year, but I assume that building a website designed for how people use permanent life insurance rules out a lot of the potential annuity buyers.

I also believe that attacking annuities and suggesting that people could do better without being a big dissatisfaction to many people. I have no problem with someone who wants to pursue their own income-generating strategy beyond annuity, but I have also learned that very few people will take on the roles and responsibilities required to accomplish this task.

This leaves a lot of people in an uncertain position as the pension years pass by. I have even witnessed some of the most economical joints affected by financial instability due to almost complete inadequacy of adopting all the disciplines needed to effectively manage retirement income assets.

Annuities give an incredible thing. They convert assets into guaranteed automatic income. Sure they have fees, no one will make such an offer without a clear path to profit from providing such a service. Such a service is seriously necessary and highly desirable among a large majority of Americans. And it is for this reason that annuity buyers will always exist no matter how much opponents argue against them.


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