Brilliant!!!
The index fund DIY crowd is soooooo far behind with their outdated objections to annuities, it's almost fall-off-your-chair funny!So if your client/friend/whatever is petrified of the stock market, and looking for some way to make their $300K last their lifetime, and they need $15K a year in income from it (or else they can't pay their bills and lose their home, medicine, etc.), what will you have them do?
60/40 index funds might work (but a 5% withdrawal rate isn't a sure thing in your mid 60's if you live long...especially these days). Will they even GO 60/40 with that risk tolerance? I doubt it. Maybe 20/80? So with rates at 0%, do you think a 20% equity, 80% fixed income allocation of index funds will support a 5% withdrawal rate for a 65 y/o person that lives to age 90? I don't like the odds personally, especially when interest rates rise.
The lifetime income riders are why annuities are being purchased. Not the tax deferral. Not the investment options. The riders...which utilize pooled risk, just like other types of insurance, which cannot be replicated without an insurer.
Here's another one...suppose a client has an IRA that just had a 5 year CD come due inside it. They want another CD or fixed product for that money.
CDs in my area right now are 1.5% for a 5 year. There are companies offering MYGA rates on here for 2.0% - 2.5% (maybe even a little more) for 5 years. Or if you're a bit of a gambler, Security Benefit will do a 6 year flex premium that gives 5% the first year, and 2.75% the second year, and floating thereafter for a 6 year contract (and a 1% MGIR). Plus 10% free a year. And the option to take a .1% lower interest rate, in exchange for a ROP guarantee.
So am I to understand you correctly that you would rather sit at 1.5% for 5 years for your CD money, just for the sake of NOT buying an annuity?
I got news for ya...my clients are thanking me for the extra interest in their accounts.
Not to mention those clients that bought those DASTARDLY fixed annuities 3+ years ago, and have 2.0% or 3.0% MINIMUM guaranteed interest rates. Some of which had a non-rolling surrender period and are COMPLETELY liquid right now, even for new deposits.
And OMG! Yes, some of those are in IRAs. Or even [gasp!] ROTH IRAs! But don't worry, clients are enjoying their fully liquid accounts paying 3% for life, or 3% tax-free for life (in a Roth IRA).
But you enjoy your argument against buying annuities because of the duplicate tax-deferral.
