I get frustrated, frequently, by the regular barrage of negativity that surrounds most of the “news” that I read on annuities. If it isn’t a swayed account from so-and-so’s beneficiary, talking about how an annuity wasn’t suitable for their deceased parent, it is a hack job from some media outlet that caters to mutual fund advertisers. We have negative annuity media in print, and we have negative annuity media online. Heck—the annuity industry even has the distinction of being the subject of the only Dateline: To Catch a Predator that wasn’t about pedophiles.
Believe it!
It would just be nice to hear some positive press about annuities sometimes. This issue, I am doing my best to put up or shut up. Here’s my attempt to get some positive accounts about annuities into the mainstream media (or at least through the Broker World distribution network).
A Life Insurance Windfall
I will never forget being eight years old and touching my maternal grandmother’s cold, dead hand in the casket. As a first grandchild, my relationship with my grandparents was very special; I was the favorite. My parents were teenagers, and my grandparents helped to raise me. Specifically, I was doted upon, and rarely told “no” by my grandma, Norma. I was with her on the day that things went downhill. She complained of a headache that progressively was getting worse, and the next thing we knew, they told us that she had breast cancer. It had spread through her lymph nodes to the rest of her body. She died four days later. It was quick, but that didn’t negate all the pain we were feeling about losing a family member in her early 50s.
Fortunately, Grandma had life insurance through her job at the credit union. It wasn’t a large sum, but it was enough to pay the funeral and burial expenses and still have a small sum left over.
Grandpa’s Annuity
Grandpa Max still had a long time to live when Grandma died. When the insurance company paid Grandma’s death claim to him, they mentioned that he had an option to take his remaining life insurance death benefit, net of his expenses, and use it to purchase an annuity. Grandpa didn’t realize that he had purchased an annuity though. He said that “the insurance company has to make monthly payments” to him. (Um, that’s an annuity, Grandpa…) Regardless, he had peace-of-mind about his retirement because of the payments that the insurance company was going to have to make to him.
And the annuity did its job! He lived on a fixed income, and he knew that he could rely on his annuity payments. He never complained about money being tight. It was invaluable for me to see how the annuity made Grandpa’s retirement more comfortable.
Grandpa took payments from that annuity for 27 years! Toward the end of his life, when I brought to his attention that the payments he was receiving were from an annuity, he laughed. He was absolutely tickled that he had “honestly cheated the insurance company,” by getting back in payments more money than he had paid for the annuity. “That thing was the best financial decision I made in my life!,” he declared.
Grandma’s Annuity
Not many years after Grandma passed away, Grandpa married a woman that was 20 years his junior, Grandma Claudia. She was so much like my first grandma that I often smiled about it. How could Grandpa have found the love of a lifetime, twice in a single lifetime? Grandma Claudia took care of my Grandpa for nearly 25 years; she had earned her title of “Grandma.”
Claudia was loyal and had worked at CenturyLink as a telephone operator since she was a teenager. When it came time for her to retire, she had more than a million dollars in her 401(k)! I wish I could say that Grandma asked me what to do with her money when she separated from service, but she didn’t. And still, that nice man from the local insurance company put her money into an annuity that “guaranteed seven percent every year!” Grandma might not have understood her variable annuity with a guaranteed lifetime withdrawal benefit completely, but she knew that she was going to get a payment every month until she died.
And she did. Grandma’s only income was her Social Security checks, along with her annuity payments. She lived on a fixed income, but she never worried about money. She always knew how much she was going to receive each month, and she budgeted for it. She was lighthearted about her outlook on retirement. Even when the stock market dove in 2008, she didn’t worry. Knowing that the value she would receive payments upon grew at seven percent annually, she never flinched. She died of COVID-19 recently. Up until that day, she would tell you how useful that annuity had been.
My Annuities
I may be the exception to the rule, as I purchased my first annuity before I was 30 years old. I own several of them. I am concerned about outliving my income in retirement. After all, the first person to live to be 150 years old is already walking the Earth today (even though I hope it isn’t me!). I will likely live in retirement for at least 20 years, so those annuity payments will come in handy. I find my annuities valuable for another reason though. I am saving for retirement, as a risk-averse individual. My annuities give me peace-of-mind by knowing that they will never decline in value. Each year, I receive my annual statements, give them a once-over, and then file them in the file cabinet. If I earned zero interest in any given year, I think to myself, “Good! I didn’t lose anything!” My friends and neighbors might not be able to say the same. Last year,I earned more than 14 percent on one of my annuities. That was a good thing too!
Each person’s reason for finding value in their annuity purchase may be different. However, studies have shown that one thing is universal amongst annuity purchasers—they have happier retirements. And I, for one, think it would just be nice if we could hear more about that.
