New thoughts on buying an annuity
Perhaps you have considered buying an annuity in the past but decided it wasn’t the best option. According to new research you’re not alone.
For years researchers have tried to figure out why people didn’t buy annuities more often and thanks to researchers, Felix Reichling of the Congressional Budget Office, and Kent Smetters of the University of Pennsylvania’s Wharton School we now know why. It appears that annuities are not a good fit for most people and should be avoided unless you’re in your 80’s.
For example, working individuals’ biggest risk is becoming disabled. Therefore the researchers suggested they purchase disability insurance instead.
In contrast, retirees’ biggest risks are medical costs not covered by Medicare or Medigap policies. Perhaps they suddenly need long-term care and their money is in an annuity. You could sell your annuity to gain access to the money that you need. However the value of that annuity is less because your longevity has gone down. A better option would have been to buy a long-term care policy and keep your money liquid.
Perhaps you’re in perfect health and none of these scenarios apply to you. You have guaranteed income during your golden years. However that doesn’t mean you can sit back and relax just yet. It turns out that insurers are seeking ways of reducing their risky decisions they made when offering costly guarantees on variable annuities products.
For example, Hartford is just one of several insurers that been increasing fees, restricting fund choices, blocking contributions and buying back old annuity contracts.
Unfortunately Hartford’s latest attempt to control costs could result in owners accidentally losing their guarantees. By exercising their contractual right to impose investment restrictions, the company is forcing annuitants to reallocate their money or lose their guarantees.
If annuitants lose their guarantees there really isn’t a benefit to these policies after all.
So what do you do if you have second thoughts about your annuity? You should give us a call to learn about the options available to you. Perhaps selling some or all of your future payments might be the best option but you won’t know until you call CBC Settlement Funding today at 877-386-3377.
Sources:
http://online.wsj.com/article/SB10001424127887324637504578567833918497520.html
http://www.lifehealthpro.com/2013/07/05/annuity-puzzle-solved-dont-buy-them?t=suitability