Annuity IQ

Over the last week variable annuities have had several bad articles written about them in such fine publications as the Washington Post and Cron.com. Again, the facts are clouded and opinions are given to you in lieu of facts. I cannot believe that these fine publications only print one sided articles with absolutely no voice of opposition or a contrary view! Therefore they are to be considered opinion pieces, not facts.

First things first, death benefits are not the reason people buy variable annuities. Actually death benefits are probably the last reason that people buy a variable annuity. The number one reason people buy a variable annuity contract is for living benefits. In every article, they mention death benefits, never living benefits.

Why does this happen? Simple. variable annuity pundits have a hard time poking holes in living benefits and the tremendous value they offer the consumer. Instead they choose to focus on a benefit that is more optional then a standard. Death benefits are, nowadays, optional benefits (meaning you do not have to buy them if you do not want to) and because of this, we see base mortality and expense costs coming down.

We will get back to living benefits in a minute. Let’s talk about why annuities can be such an important tool for retirement planning. The average mutual fund investor has averaged, over the last 13 years, about 2.3% a year. Let’s put this in perspective. The average mutual fund investor would have done better if they had invested in a savings account over the last 13 years.

This may be a hard fact to swallow or you may think I am crazy. I can assure you it is a fact and I am not crazy. The reason mutual fund investors have done so poorly is because they make bad moves within their portfolio. It comes down to fear and greed, the two most basic and deadly emotions in the investing world. The market goes down, people are afraid and sell off prematurely. The market goes up, investors think their account is doing horrible so they chase the new “winners”.

Because of these two actions, people lose. This has been proven time and time again. Many of these articles written are guilty of leading investors to this behavior. Money Magazine’s 10 Best Mutual Fund list, a list that will change depending on the time of year, is a great example. They publish this list, and a person does not own the funds on the list, so what do they do? Sell their portfolio and buy the new hot fund, usually at the worst time to invest in that kind of mutual fund.

I would have to say that this behavior is more prevalent to the do-it-yourself investor. This would be true because they do not have a person or advocate working for them. They are dependent on what these writers and articles tell them to do. What they do not know is that these writers are writing for the masses and many of these writers do not have any actual financial services experience. Yet, people listen to what they have to say, and I just don’t get it.

Back to living benefits and why they are so important. I just fail to see why these financial writers discount living benefits, or do not even mention them. I think it is clear they do not understand them and do not know how they work. To think that the market always goes up is ridiculous and a gross oversight of how the market actually behaves.

If you talk to anyone who retired in 1999 and asked them if they are happy with their rate of return, they would probably hit you in the side of the head. We all know what happened over the last 6 years and how the effect of negative market return has devastated peoples’ standard of living. Now, does a 5% for-life withdrawal sound attractive to these people? Probably, as it would have provided them with income that remained unchanged through the market’s devastating and destructive path in the early 2000’s.

With living benefits, you are getting predictable and sustainable income for as long as you live. Today’s baby boomers need this type of income as they begin to move into retirement. With pensions being eliminated or downsized, this new way of investing is so important to help people maintain their level of retirement comfort.

That is exactly what living benefits provide, comfort in retirement. To think that the market will not go down again and your investments will always perform well is incredulous. Living benefits can assure you that no matter what happens in the market, your income will not change and it has the potential to increase, depending on the benefit. This cannot and should not be overlooked and should be endorsed, not ridiculed by these financial writers.

You have to remember that these people get to hide behind their pen and computers and will never meet you face to face. Therefore, they do not see the results of their advice. Think about this: how can you expect to get real advice from a 2 paragraph letter from these people anyhow? If you want real, personalized financial advice, then seek out a financial professional.

The only financial writer I consistently read is Humberto Cruz. He offers unique insight and looks at all views. Mr. Cruz is a great resource and chooses to get all of the facts behind a story and resists his own opinion…..I just wish all financial writers had his approach.

variable annuities are not scams. They are legitimate investment vehicles and deserve recognition. What these newer features can provide is a layer of protection that no other investment can offer. The only trouble is how do you pick the right variable annuity for your needs? Go to a trusted financial advisor or better yet, use Annuity IQ and get unbiased, independent variable annuity reviews. Annuity IQ is one, if not the only, variable annuity web site that does not sell Variable annuities.