When Deferred Annuities Work
We like single premium deferred annuities for individuals and couples near or at retirement. A single premium deferred annuity is easy to understand – you sign a contract with an insurance company, give them a set amount of money today, and they promise to pay you an exact amount at some point in time based on a certain set of criteria.
What we like about this product is it helps solve multiple problems at once. Individuals and couples near or at retirement have a number of goals and a number of risks.
There are typically four main goals:
- They want their money to last
- They want to lead a fulfilling and worry-free life
- They want to make sure they can afford health care if they are incapable of taking care of themselves
- They want to leave a legacy if possible
Unfortunately, there are four main risks as well:
- Serial risk
- Behavioral risk
- Inflation risk
- Knowledge risk
Any of these risks could prevent the achievement of these goals.
Handling Retirement Challenges
We have a number of tales that examine the problems faced by individuals or couples near or at retirement. Upon reading them, we hope you understand why, despite what we consider the low rates of returns offered by deferred annuities, we think they have a place in some people’s portfolios. Please note, they are not for everyone and you should consult with your advisor before making an investment.