Building Your Own Annuities Could Be Easier Than You Think. Here’s How
August 23, 2024 by Mark P. Cussen
Life insurance companies have long offered American investors the promise of lifetime income from annuity contracts. The first annuity contracts were relatively simple instruments that paid a fixed interest rate and then paid out a guaranteed stream of income that the beneficiary could not outlive.
Click HERE to read the full story via Investopedia
Wink’s Moore on the Market: Mark P. Cussen, CMFC and Investopedia–
Mark says that “annuities are also one of the most expensive types of investments.”
Never mind that the vast bulk of annuity products have no fees whatsoever.
“The high expense ratios of many of these contracts have drawn criticism from industry experts and regulators over the years.”
You do know that this only applies to variable annuities, and that VA products account for less than 15% of all deferred annuity products and only 12% of all annuities sold, right?
You go on to suggest that, “[Consumers] may be able to duplicate the interest payments offered by fixed and indexed annuities with a little work.”
BUT THIS WILL NOT PROVIDE THEM WITH THE PRIMARY VALUE PROPOSITION OF ANNUITIES, WHICH IS AN INCOME THAT CANNOT BE OUTLIVED.
You recklessly suggest that, “[Consumers] who design their own annuity-simulation portfolios do not have to pay these costs or meet cash reserve requirements, allowing them to retain a much larger portion of the profits.”
Yet, annuities are used for risk mitigation, not greater alpha. Any suggestion to “build a do-it-yourself annuity” ignores the prospects of a guaranteed paycheck for life.
In regards to indexed annuities, it is inaccurate to say that, “This means that if the index rises by more than that amount, the carrier will keep any excess growth above the cap.”
The insurance company does not “keep the excess” on these products. The options purchased to facilitate the indexed interest crediting are only for an option of 8% gain or lesser; there is no “excess.”
The assertion of how indexed annuities are “invested” is patently false.
I just don’t have enough space to go over every inaccuracy in this piece…
Perhaps when you are unsure of facts around annuities, you should reach out to a fact-checker, like myself, in advanced? -sjm
