On This Episode
There’s a lot of confusion out there about annuities, probably because there are different types that do different things. We’ll explain what they are and how they work.
On today’s Saving With Silverman podcast, Mark explains annuities, including what they are, how they work, and whether they might be right for you.
“Annuities are all issued by insurance companies,” said Mark. “I know I kind of bash annuities a lot, and the reason for that is a lot of these people on the radio who push themselves out as fiduciaries and saying they’re doing what’s right and putting the clients first, all they’re doing is selling annuities. And I find that they’re putting too much of the client’s money into annuities.”
Here are some of the different types of annuities:
You put x amount of dollars in and you get payments based on the time period you choose. So you could get a certain amount of money every month for the rest of your life or a certain amount for 10 or 20 years.
“I don't see a lot of use for these. I’m not a huge fan. I guess they can work in some cases … but once you put that money in, it’s gone. That money’s gone. You can’t get it out.”
It offers a fixed rate. It’s typically a little bit higher of a return than CDs and have a longer maturity. You might see a fixed annuity with three, five or 10 years. You need to consider the strength of the insurance company. They could be a safe investment as a way to park money for a short to medium time with a rate that’s a little bit higher than what the banks are offering.
“I’m not a fan of variable annuities at all,” said Mark. “If you want to be in the market, be in the market. Don’t do it through an annuity.”
A variable annuity has sub accounts, which are mutual funds, which have fees and then annuities have fees. An average variable annuity has 3% to 4% in fees per year.
Listen to the entire episode to hear more. Click on the timestamps below to skip to a particular segment.
I kind of bash annuities a lot, and the reason for that is a lot of these people on the radio who push themselves out as fiduciaries … all they’re doing is selling annuities.
- Mark Silverman, CFP®
Let’s get rolling with the first episode and you can use the timestamps below to skip around to specific topics.
1:55 – Immediate annuity
3:25 – Fixed annuity
4:01 – Variable annuity
5:15 – Fixed index annuity
6:53 – Annuities Mark uses
8:03 – Using annuities to meet financial goals
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