Annuities and retirement

There is an exploding number of baby boomers getting ready for retirement, but they don’t know how to save and get a steady stream of income. The traditional three-legged stool of retirement income (pension, social security and savings) is not really a viable option in this day and age.

Many are considering making an outright purchase of an annuity to make sure they have enough cash flow for retirement. Is this such a good idea?

When looking for advice about saving for retirement, there are a lot of competing theories. Every financial planner will tell you something different. When it comes to annuities, it is vital that future retirees get all the facts. In one case a family purchased a variable rate annuity that was not nearly as secure as what they believed they had been sold. An arbitration panel eventually awarded the difference, but that was after protracted and expensive litigation. No one wants that.

If you get the right product, an annuity can be an excellent option. Do variable rates create risks? Of course, but when it works, it works. An annuity, done right, can provide a pension-like stream of income that makes retirement far less scary.

Currently, annuity companies are trying to find a way into the retirement market with experts saying that the right provider could have substantial success. To that end, we are now seeing a simplified approach to sales that emphasizes clarity and transparency in order to avoid conflict down the road. Also, profit models that reduce the influence of commissions are now part of the conversation. The hope is that the industry can grow and adapt to fit this apparent need. With no outside players coming in to disrupt, the legacy players are hoping to ‘promote from within’ while weeding out the bad actors.

Unlike a long-term care insurance policy which you may never use, an annuity provides more flexibility and guaranteed utility. There is more that the industry has to learn about reacting to current market conditions and there is always the possibility of a disruptor coming in and changing everything. But those currently engaged in retirement planning can take solace in the fact that the industry is aware of their needs and is fervently trying to meet those needs for a better retirement.