Don Spini recently spoke with Retirement News Online to discuss annuities, their features and when they should be implemented into a holistic financial plan.
Don Spini, our very own Managing Partner at DNA Wealth Partners, was recently interviewed by Retirement News Online, a news outlet covering the latest in retirement and financial planning, to discuss the power of annuities. What are some common misconceptions, and when is the right time to implement annuities into your plan? Don covered these and some more of the most frequently asked questions in his interview.
He first discussed the general perception of annuities and why they are sometimes seen as something investors should stay away from. In reality, they can often be useful for those with specific goals that can be achieved by an annuity’s properties. Don said:
An annuity is a tool for wealth preservation and income distribution, but like any tool, it might not work on every project. This tool has a very specific use for wealth preservation and distribution by creating lifetime income. The simplest way I like to describe an annuity is by saying this: It’s like going into a store and buying income off a shelf. That’s what an annuity can do for a family.
An annuity is a contract between a policyholder and an insurance company. In the annuity’s terms, a specific rate of growth and principal protection are generally guaranteed by the claims-paying ability of that insurance company. This usually means that the policyholder is protected from risks like market downturns, which can be extremely harmful to those nearing or just entering retirement with large amounts of funds invested in the market. Though an annuity isn’t right for everyone, it can often create a lifetime source of income that is protected in retirement, meaning that even if you drain funds invested in the market or Social Security is no longer solvent, you still have the annuity as a stream of income.
He went on to discuss when an annuity should be implemented into an individual or a family’s financial plan. Don said:
The best use of an annuity, like any tool, is in a specific situation. For example, it can be used when someone is trying to preserve their nest egg, preserve wealth and distribute income that will never run out. This is a strategy people use to create guaranteed lifetime income. Really, it’s a personal private pension plan.
As one of the traditional features of an annuity is principal protection, they can often be helpful for those looking for a protection-based approach to their retirement. That said, they won’t perfectly match the goals of every investor, pre-retiree or retiree. At DNA Wealth Partners, we believe in customized financial and retirement plans for each of our clients, and when we think an annuity would be most advantageous as our clients strive toward their goals, we can make that recommendation. The best way to find out if an annuity is right for you is to meet with us in our office to give us a better idea of your circumstances and your objectives.
Finally, Don was asked why annuities tend to have a bad reputation. He responded:
They get a bad rap on the consumer side because of the outdated perception of annuities. Annuities used to be perceived as something that you put all of your money into with the expectation that it will pay you income for the rest of your life, but if you were to die two months later, you’d lose all that money. The fact is that’s not true. The wealth inside an annuity is always preserved. Furthermore, a lot of people believe that an annuity isn’t designed for accumulation, but it is and often includes guaranteed growth. On the advisory side, it can get a bad rap because an advisor may not understand the strategy or what an annuity is best used for, so they don’t know how to use it as a part of a holistic financial plan.
Annuities often get a bad reputation that stems from those who don’t understand how they are used to achieve specific goals or those who haven’t been told how annuities have evolved. Insurance companies are now working each day to build innovative, client-centric solutions that help pre-retirees and retirees protect their hard-earned retirement funds. Additionally, an annuity is not a holistic strategy. It is simply part of a greater strategy that accounts for each aspect of a client’s financial life. A properly balanced and diversified portfolio should be able to mitigate the risks of retirement while taking advantage of opportunistic situations, and many different investment and insurance products may be used to do that.
If you’re ready to discuss the possibilities of annuities, please give us a call. You can reach DNA Wealth Partners by calling 1 (800) 684-2685, or you can email us at info@dnawealthpartners.com.
This article is for informational purposes only and not to be construed as financial or investing advice, nor is it a replacement for real-life advice based on your unique situation.
