With 60% of retirees having some type of annuity in their portfolios, it's important to know what type of questions to ask when considering purchasing them. In this interview with Retirement News Today, Stan the Annuity Man about whether annuities are right for your retirement portfolio.
The first question people need to ask is what they want the money to do, such as principal protection, income for life, legacy or long-term care and to forget what the product is going to do, according to Stan Haithcock. It is important to ask your agent what the contractual guarantees are because you should base your risk on the contractual risk guarantees, even though there might be a growth component. "If everything goes wrong, what are you going to get?," asks Haithcock.
You own annuities for what they will do, not what they might do, which is an important distinction that Haithcock points out. It's important to know the components within the annuity that can grow but you need to make your decision on the "worst case scenario."
People can make a mistake by thinking they can "have their cake and eat it to," says Haithcock, because to have complete market growth and protect the growth cannot happen. Annuities are contracts, which do fit well if you understand how they're being placed and they're non-correlated assets to the market, which means they're not growth products, rather solving for four things. These are principal protection, income for life, legacy and long-term care, or "PILL." "If you don't need to solve for one of those four things, then you don't need an annuity," says Haithcock.
Stan Haithcock, "Stan the Annuity Man," is a nationally recognized expert on annuities and he spoke with Retirement News Today during this interview. Retirement News Today provides online retirement news video content and is a featured network of Sequence Media Group.