Written by Dean Moser

Insurance companies are happy to promote their products as “the hammer that can be used to solve every need.” Though in reality, they are only there to provide some of the defense work of financial control. One product that is typically used incorrectly (in my view) is the Annuity.

We should purchase investment products from insurance companies that provide a specific defensive benefit to us, much greater than the income benefit they provide to the insurance company, or for that matter, the agent by way of commissions. I have only one role that annuities can do better than any other, and that is to set up a private pension that is structured to extend beyond the value of the cash value of the account. In any other arrangement, when the funds in the account run out, your ability to draw on that investment stops. With annuities you can set up a lifetime income guarantee which continues to pay from the insurance companies own pocket when the funds run out in your specific account are depleted.

There is a balance to be attained, and that is: to set an income amount that will cover your fixed expenses in retirement, investing just the amount needed to provide for that income, and then work on living a very long time so that you do spend out all of your money and require the insurance company to support you to the end.

If you have an annuity, it is your requirement to fully understand how it is benefiting you. If an annuity is presented to you as an option for investment, you must fully understand the reasons you are purchasing it, and your likelihood of gaining every benefit the insurance company is offering as part of the contract.

Insurance companies succeed because they know their business, and they know that individuals like to feel safe in their investments. Their products are presented from that safety and comfort perspective. It is the duty of your Financial Advisor to ensure that the product actually meets your needs and expectations, and that you fully understand the investment, and the benefits you will be using, before you enter into the contract.

I will be happy at any time to review annuities that you may be holding or considering, and assist in your understanding of how they are best benefitting your financial life.