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Golden Years Financial

The most misunderstood financial product . . .

I read a great deal about Baby Boomers and happiness in retirement and encountered a wonderful study done by the international risk-management consulting firm, Towers Watson, entitled “Annuities and Retirement Happiness.”  It basically says individuals who have “annuitized” (or lifetime) income sources are happiest.   Not having to worry about income means a lot to people who have greater priorities in life.    Jonathon Clements wrote a similar article in the Wall Street Journal in 2005 entitled “The Secret to a Happier Retirement.”   He cited three things: Friends, Neighbors and a Fixed Annuity.    In Freakonomics, Steven Dubner cited research showing people who buy annuities tend to live longer”, stating, “It’s apparently that little extra incentive [of the annuity payout] that keeps people going.”   Or, surpassing them all was Jane Austen’s comment in 1811 in Sense and Sensibility, “If you observe, people always live forever when there is an annuity to be paid to them . . . The annuity is a very serious business; it comes over and over every year, and there is no getting rid of it.”

If you've never learned about annuities, you should.  I think they're the most misunderstood financial product out there, partly because they're so customizable and do so many unique things.  People object upon hearing the word "annuity" yet enthusiastically embrace a description of what they do.   In truth, the "anti-annuity" crowd (who are usually selling something else) have been quite successful in, figuratively-speaking, criticizing a boat for not being a plane.   They're stunningly short-sighted.

With all that said, annuities are NOT the "be all and end all."   Like any other financial product, they're just a tool.  It's therefore important we behave like the general contractor who is open to whatever tool accomplishes his objective, rather than insisting "hammers" or "saws" are the only legitimate tool.  (Like most of you, I've found drills quite helpful as well!)

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