Annuities Pay For Your Lifetime
Twitter Post By Rob Carrick
Article by Rob Carrick of the Globe and Mail
Below are my comments in a recent article by Rob Carrick of the Globe and Mail Unhappy with bonds? Add an annuity to your fixed-income mix.
Retirees: Unhappy with bonds? Add an annuity to your fixed-income mix. #retirement— Rob Carrick (@rcarrick) June 23, 2014
Insulated from stock and bond market declines
As Rob Carrick says " you'll be completely insulated from stock and bond market declines" because you and your spouse or partner will have a guaranteed income until you die.
And it is as simple as that. With an annuity you pass the investing problem to the insurance company which will pay you an income for every day that you live.
Low interest rates
Low interest rates, whether you are speaking of GIC's or bonds, have nothing to do with you having the security of a fixed income. You had fixed income while you worked and now you have a fixed income from any company pension and any government pension.
Lack of liquidity
Lack of liquidity is not what we are primarily concerned with here;we are concerned about being guaranteed that you will always have an income from your savings.
And it is not true to say, that annuities "leave nothing to your estate when you die" It is very simple to protect a spouse and add a guarantee for any number of years you want.Guarantees can extend to age 90 for any registered annuity. And you can buy saving annuities with 40 years guarantee up to age 115.
Most retirees have little interest or knowledge of how the stock markets work and grow less so as they grapple with aging. If you add a stock market downturn, which will happen, this is not a position in which to place a client to suffer an income loss.Younger clients may have the time to recover stock market losses but older people simply don't have time on their side.
One reason advisers avoid annuities is because of the low commissions which cannot in any way compare to the rich field of mutual funds with upfront fees, yearly trailing commissions, locked in contracts etc. This alone is good reason to follow Australia and the UK and ban commissions in lieu of an annual fee. But that avoids the main reason to have the guaranteed income. The annuitant is alive today, he saved the money and he should enjoy it. Should the annuitant and/or the partner develop a serious health problem, it is the guaranteed cheque in the bank that is needed,not income uncertainty.
It is now time to stop wasting money on "shiny objects" such as non-guaranteed returns.