Episode #13: Good Or Bad – Annuities

Today’s Prep:

We recently began a series outlining the good and bad elements of certain investment strategies and products. We continue and tackle the topic of annuities and we do it all in under 13 minutes!

(Click the featured times below to jump forward in the episode)

Equipping Points:

[00:33] – The Debate Surrounding Annuities.

  • There’s a lot of controversy surrounding annuities. David explains why annuities are often misunderstood, and why you shouldn’t be quick to jump to conclusions about them.

[2:16] – Outlining Immediate Annuities.  

  • When you purchase an immediate annuity, you give a lump sum of money to a life insurance company. They then start providing you with monthly income until you die. It functions a bit like your pension or Social Security. These annuities require you to surrender control of your money, and there’s debate as to whether that’s a good idea.

[3:06] – Explaining Fixed Annuities. 

  • Fixed annuities look a lot like a CD with a bank. However, they’re issued and guaranteed by a life insurance company. They typically come with a fixed interest rate, and they mature after a certain period of time. This means you only lose control of your money for a period of time.

[4:09] – Detailing Fixed Indexed Annuities.  

  • These annuities function similarly as a fixed annuity. However, the rate at which you receive interest is pegged to a market index. As an example, your returns could be linked to the S&P 500. You don’t typically capture all the gains in the market, but you won’t lose money when the market declines either.

[5:21] – Stay Away From Variable Annuities.  

  • Variable annuities are an ill-conceived marriage of investment and insurance products. They come with high fees, and they’re rarely better for the client than they are the broker.

[6:55] – A Few Examples.  

  • David shares a few stories of clients he’s been able to help using various annuities.

Today’s Takeaway:


More From David:

The host: David Dickens

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