Annuities: Finding Clarity Despite Conflicting Advice
Suze Orman is a fantastic resource for many people. I admire her ability to simplify complex financial concepts. She has a strong consumer advocacy stance that’s incredibly valuable in a world where financial literacy isn’t as widespread as it should be.
However, I disagree with some of her published advice about annuities.
Suze often emphasizes that “nobody cares about your money as much as you do,” which is an empowering message. It encourages personal responsibility, but it can also make people skeptical of financial advisors.
The truth is, I wish our clients cared about their money as much as we do!
Many people overspend, save too little, put their eggs in one basket, fail to have the proper insurance, do no estate planning, fall prey to scams and fraud, don’t update beneficiaries, and do virtually no planning.
I want our clients to have the same fiduciary duty to themselves that we have to them.
So, YES, we often DO care more about a client’s money than they do.
“Truth About Annuities”: A Different Perspective
Suze has stated that financial advisors earn commissions on annuity products.
Yes, commissions on annuity products are part of how insurance agents and financial advisors are compensated. But that doesn’t mean the products they’re selling are bad or unnecessary. It’s no different from how real estate agents, car insurance agents, or any other sales professional earns a living.
Annuities, like other insurance products, serve an important purpose. The main draw of annuities isn’t tax deferral—it’s the guaranteed lifetime income they provide.*
For many people, this is a critical piece of their retirement puzzle. It’s like having a personal pension that ensures you won’t outlive your money. That kind of financial security can be invaluable in retirement.
It’s been published that holding an annuity inside a retirement account doesn’t make sense because both vehicles offer tax deferral. However, the value of an annuity inside a retirement account often goes beyond tax deferral.
One great example is the Qualified Longevity Annuity Contract (QLAC), which allows retirees to delay required minimum distributions from their IRAs. This can be a useful strategy for those looking to manage their taxable income in retirement.
Moreover, recent changes in legislation reflect a growing recognition of the benefits annuities can provide. For instance, 401(k) plans are now required to show how retirement balances can be converted into lifetime income, which essentially reflects the government’s acknowledgment of the importance of “pensionizing” retirement assets. The goal is to prevent people from outliving their savings, and annuities can be a key part of that strategy.
Finding Balance for the Right Fit
It’s important to recognize that annuities can offer real benefits when used correctly. Instead of viewing them as inherently bad, it’s more productive to understand how and when they might be a good fit for someone’s financial plan.
In the end, what matters most is that individuals have access to the right information and the right guidance to make informed decisions. Financial advisors, when acting in the best interest of their clients, can provide a lot of value with annuities being a powerful tool for securing a reliable income in retirement. It’s all about finding the balance that works best for each person’s unique situation.
Do you want a fresh perspective on annuities and retirement income? We’re here to help. Schedule a complimentary consultation with Team Treece.
*The guarantee of the annuity is backed by the claims-paying ability of the issuing insurance company.
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