Today, many people are adding “Income Annuities” to their retirement portfolios. The comfort of securing a reliable source of additional income for your golden years allows you to live without the worry of inflation, tax increases, or pension cuts eating up your only source of security.
Although income annuities have been around for many decades, today many insurance companies and Wall Street brokers have added fees and complicated terms to a once-simple concept. And because these products are sold by individual agents/brokers who can work independently of a large company, I want to give you some cautionary notes when researching if annuities are right for you:
1. Know if your advisor is trustworthy. I encourage you to visit the California Department of Insurance website and use the “Check License Status” tool under the “Consumer” tab. Type in your advisor’s last name (or name of the proposed advisor) to see if there are any enforcement actions against him/her. This will list any known complaints such as forging documents, or if the individual’s license is/was suspended. As you would do with a doctor or surgeon, you want to know if a license was revoked or if the advisor did anything unscrupulous.
2. Always look for an insurance company that is in the “A” rated category. That means it has solid reserves and a history of keeping promises with their policyholders. Decades of payment history contribute to the peace of mind I think is needed to enjoy these years.
3. Fees and expenses should be zero. That’s right, $0 per year. All income annuities have a profit built into the interest rate, similar to a bank keeping the difference between the interest they charge a borrower and what they pay savers in a Certificate of Deposit. Any company or agent that says you HAVE to pay a fee in order to get guaranteed income from an annuity is flat out wrong.
4. Make sure the agent and the agency has the ability to shop around and find the best account to meet your needs. If the agent/broker only has one company to choose from, then he or she likely believes one size fits all. I believe having choices is better when considering places to put your money.
5. Annual review meetings are necessary and should not cost you anything. As I mentioned, every product has a profit built into it which pays the agent and the agency. Annual meetings (at a minimum) should be part of the service provided as a client of the firm, and not an added cost.
Remember, an income annuity is designed to give you a guaranteed stream of income when you want it and removes the risk associated with the ups and downs of the market. After all, if the stock market drops 30 percent, you can’t ask your utility company, grocery store, or property tax assessor for the same discount “until the market comes back,” can you? You could try, but I prefer you take precautions ahead of time by deciding how much of your retirement assets you can’t afford to lose, then dedicating that portion to a higher income strategy with reliable retirement income you won’t outlive. After all, retirement is your reward for money well-managed. Don’t let it be compromised by unnecessary risk and fees.
by Arif Halaby | Dec 14, 2017
Author: Arif Halaby
Source: Valley Publications
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