My Comments: Anyone now retired or thinking about retirement spends time and energy coming to terms with how to manage their money.
Increasingly, fees charged by advisors and/or their companies are perceived as a threat somewhere along the way. However, unless you have the skills to do it all yourself, you are necessarily going to have to pay fees to gain the peace of mind you crave.
But there are fees and there are fees. My experience with variable annuities suggests they are generally excessive and you can gain the same positive outcome at a lower cost using a different approach.
These comments from Craig Kirsner are not definitive. But if you have variable annuities in your portfolio or are being encourage to buy one, I advise you to think again.
by Craig Kirsner, July 31, 2018
One of the most misunderstood investment strategies I’ve come across over the past 25 years is the variable annuity. When I audit existing variable annuities, I get the facts about them by calling the insurance company directly rather than the broker who sold them. Why? Because I believe you should trust but verify, and I like to get my information directly from the horse’s mouth.
When I call the insurance company, among other questions, I ask: What are all the fees? What is the risk? What are the features? After going through that drill numerous times, I’ve pretty much seen it all. Based on my experiences over the past 25 years, the following are the seven most common myths I’ve learned about variable annuities and the facts dispelling those myths:
Myth #1: A variable annuity is a suitable investment for a retiree
I typically work with high-net worth clients, but regardless of your means, your investing goals and strategies evolve as you grow older.
Early in life, you were probably happy to ride with the ebb and flow of the market, waiting and hoping to hit that investment “home run.” And why not? Suffering a loss now and then didn’t bother you because you were certain of a rebound, and you knew you had plenty of time to recover, long before retirement.
But years pass and investing approaches change. Entering retirement, most people start thinking about protecting and preserving what they have, not making a big splash in the market.
You may have heard it said that these days the return OF your principal is more important than the return ON your principal, and that is definitely true for most of our clients. That’s why the variable annuities some retirees count on for a regular income may not be the best route to take. Which brings us directly to Myth #2.
Myth #2: Your money is safe
People are often led to believe by their brokers that with variable annuities their money is safe, which couldn’t be further from the truth. Your money is invested in mutual funds with no real protection of your principal.
The name of the annuity pretty much sums it up: “Variable,” as in the principal varies, unlike a fixed annuity, where the principal is guaranteed by the insurance company.
Continue reading HERE: https://www.kiplinger.com/article/retirement/T003-C032-S014-7-myths-about-variable-annuities.html