Sometimes annuities are misused or misunderstood, but annuities can be powerful tools if you know how to use them properly.
(Click the featured times below to jump forward in the episode)
[1:47] – Know What You Can Risk
In a discovery meeting, Eric asks what you are comfortable risking and what percentage of your money you want to protect from market risk. Most of his clients put 50 to 70 percent of their money into protection when they are near retirement.
[2:38] – Client Spotlight
Eric tells a story about a client needing about a four percent rate of return to make their plan work.
[3:54] – Misconceptions With Annuities
A lot of people think when they have an annuity that they are giving money to an insurance company and not getting it back. That is one type of an annuity, That’s called an immediate annuity. You pay a large sum, and they promise to pay you every month for the rest of your life. It’s similar to what a pension does, but then if you die you don’t get any money back.
[4:52] – Deferred Annuities
A deferred annuity is another type of annuity. There are two stages to an annuity. There’s an accumulation stage when it grows tax-deferred. Then there’s a second stage when you can access the payout.
[8:23] – Education Helps Make The Right Choice
Understanding the pros and cons will help you make the best decision regarding your money. Eric recommends reading Jack Marrion’s article about using an index annuity during the Great Depression.
[11:48] – What Insurance Does
Everyone thinks they lose control of their money with annuity, but that is not true. You have a contract, but this will do things that your other accounts cannot. With properly structured insurance products, you might have different income guarantees, death benefit guarantees, disabilities backstop guarantees. This is a transference of risk.
Check out some other recent episodes
Asking questions is always a good thing. The more you ask, the more you understand. But sometimes you don’t get the answer you need until you ask the right question. These four common financial questions are a bit better when they are rephrased and reconsidered.Read More
Do you know the difference between a financial myth and financial reality? When you make a plan for your future, you want to make sure it is based on what’s true. We’ll talk through four ideas to discover whether they are myths and real.Read More
What do you do when…? Eric answers three pressing questions from the mailbag in today’s podcast. Whether you are being thrust into an early retirement or are considering delaying retirement due to debt, financial advice from an advisor will set you in the right direction.Read More
When you are working with an advisor, you want your relationship to be built on trust and quality expertise. But how do you know if an advisor is a bad fit? What red flags should you avoid? We’ll tell you in this episode.Read More
Inside of a mutual funds, the actions of others can impact you. If a lot of people are trying to sell that mutual fund, the manager has to sell some stuff to meet the redemptions and that can negatively impact you.Read More
Some may think that retiring early is just a dream, but can you turn this dream into a reality? In this episode, Eric talks about the ins and outs of taking an early retirement. Find out when you can retire and whether you will actually want to stay retired.Read More
As you near the final months or years before taking the plunge into retirement, there are always a few details to work out and questions to ask. Eric answers a few questions from the mailbag about pensions, paying taxes in retirement, and deciding when to walk away from a retention bonus and just retire already.Read More