Misconceptions With Annuities

Today’s Prep:

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)

Equipping Points:

[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.

Today’s Takeaway:

Additional Resources:

More From Eric:

The host: Eric Peterson - Contact - Call: (515) 226-1500

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