Annuities are definitely not one size fits all, and they shouldn’t be bought or sold that way. I have to agree with Stan “The Annuity Man” Haithcock on this one. In his Marketwatch article, “No all-in-one annuity cures; take a ‘PILL’,” he compares an annuity to a Swiss army knife to see if one annuity can have all the tools needed for your retirement. Spoiler alert: it cannot and that is something that Annuity FYI works to help consumers with all of the time. Annuities should be used as part of a retirement plan and the annuity you choose must be based on your individual needs and goals. The author of this article doesn’t like using annuities for their growth potential and that is certainly his prerogative, but variable and indexed annuities do have their place in some retirement portfolios. While they won’t offer the growth potential of some non-annuity products, they often offer better guarantees on your money and other benefits as well.
Stan prefers annuities to be simple and often, simpler is simply better. His motto of using the PILL approach to annuities includes the benefits of principal protection, income for life, legacy, and long-term care. If you are looking to solve any or all of those four problems, a simple annuity with low fees and short surrender charge time frames is best. When shopping for an annuity, look for one that is trying to solve your immediate need, as opposed to an annuity that has everything. The more riders you add onto an annuity, they more you will pay in annual fees. There is no reason to add on a death benefit, income rider, or add on confinement care expenses if you don’t need those things. It sounds simple, but a lot of people go into buying an annuity with the mentality that they need everything. If you have life insurance or long-term care insurance, you simply may not need an added rider and cost for your annuity.
Newer annuity products on the market are sometimes advertised as being “hybrids” that offer benefits of multiple types of annuities. Stan doesn’t believe that these new products offer additional benefits, and he is right that you should tread carefully when considering them. If you are looking for two types of protection or guarantees with your annuity, a so-called hybrid could be right for you if the cost brings you value. Also consider looking at an annuity to cover your main goal, like a lifetime income stream, and see if adding a rider on for something else is a better value in your financial plan. Shopping around is the key to buying the right annuity, not necessarily the annuity that has “everything.” Buying an annuity solely for an upfront bonus or a confinement care rider is rarely a good idea. If an annuity has exactly what you need and offers one of these bonuses, great. An expert financial advisor can help ensure that you do not purchase more than you need or less.
Written by Rachel Summit