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Variable Annuities: Don’t Judge an Article by its Title


While the title of Robert Powell’s MarketWatch article indicates that variable annuities with GLWB’s aren’t good, it’s a bit misleading with the honest information presented in the article.  In “Variable-annuity guarantees disappoint over time,” Powell basically says that variable annuities are not right for everyone and they aren’t always a good fit, something that Annuity FYI always tries to portray.  While they aren’t everyone’s best investment, they are good for many people and for different reasons.

The main downside listed in the article is the fact that variable annuities with GLWB’s are worth less in the future after accounting for inflation.  Most investments are.  The article fails to mention the fact that you can purchase annuities that get adjusted for inflation and while they cost more, if inflation is one of your main concerns, they are worthwhile.  The author says that variable annuities are not right for people who can cover their living expenses through Social Security and pensions.  We agree wholeheartedly with that statement.  Variable annuities, and other annuities for that matter, are meant to bridge the gap between your living expenses and the money you will have coming in from those sources.  Most people don’t have traditional pensions anymore and Social Security is rarely enough off which to live, so that is where the need for annuity products comes into play.

We appreciate the fact that the author says variable annuities are right for some people, especially those without traditional pensions and those who are risk-averse.  Annuities with GLWBs have the benefit of a minimum income floor with the potential for market upside.  Without specific inflation protection, the author is right, your money will be worth less in the future.  That holds true for any investment without inflation protection.  While the title of Powell’s article makes it seem like he is saying the guarantees aren’t worthwhile, he is really saying to make sure you consider inflation when taking those guarantees into account.  And if the protection of a GLWB is what helps you relax about your future, variable annuities just might be the product for you.

Written by Rachel Summit

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