In today’s blog post and video, we break down how most annuities with all the fancy riders and big promises really work. Watch below to learn the truth.
If there’s one thing most financial experts are passionate about, its annuities.
And no matter if they love them or hate them, annuities always seem to drive controversy.
It makes sense, most of the marketing surrounding them is filled with misinformation and over simplified explanations that leave the consumer no better off than when they started. It’s like a magic trick. While they wave their right hand and make all the fancy promises they don’t show you what the left hand is doing.
We’re on a mission to change that.
At Ironwood we don’t love them or hate them. It’s about when they get used and how.
In today’s low interest rate environment, the internal rates of returns on these products can be pretty dismal even with all the riders and contract bonuses the insurance company is offering. So you have to be careful about what you buy and how it’s used for your retirement.
Let’s break an example down that sheds light on that subject.
In today’s video we’re going to break the basic types down then get into an example of why an annuity, in today’s environment, may not be the best thing for you.
- Annuities are usually broken down by deferred or immediate.
- Fixed and variable “deferred” annuities often come with Riders and other income provisions
- When they promise guaranteed growth rates the long term internal rate of return you can get over time is often glossed over.
- For instance: while you might get 6% for 10 years growing your “income value” to $160,000. That can leave you with a 5% guaranteed income rate of $8,000 a year. If you took $8,000 a year for 20 years after letting it grow for 10 first, your internal rate of return could be as low as .5%. Don’t let the long term interest rates get glossed over and do your research.
- Annuities perform the best in high interest rate environments which might not be happening any time soon.
Low interest rates are making retirement planning very difficult in today’s environment. Not only can fees eat you alive you need you need to avoid making emotional decisions. It’s up to you to go beyond “trusting” someone to help you. You also need to get proof and education on what strategies can work, how they can fail or backfire and what options you really have.
Annuities can be great and they can be terrible depending on your situation. But there are other options:
That’s why we created our free ebook.
It covers ways to drive income without relying on interest rates, annuities, or other high-cost and high-risk strategies all too common in today’s environment.
You can go pick up a free copy by using this link:
Like always, if you’re facing retirement and need a second opinion learn about what makes us different, we’ll audit your entire strategy to make sure you have the right tools to make your retirement as low risk as possible and still drive in a good income.