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Reader Responses July 10, 2017
SURVEY SAYS: Annuities and Lifetime Retirement Income
Retirement plan sponsors’, providers’ and regulators’ concerns about ensuring lifetime retirement income for employees has increased over the years.
Reported by Rebecca Moore
Last week, I asked NewsDash readers, “Do you own an annuity, and do you think individuals can have retirement income that lasts throughout retirement without owning an annuity?”
The majority (79.2%) of responding readers work in a plan sponsor role, while 4.2% are advisers/consultants and 16.7% are TPAw/recordkeepers/investment managers.
Few (7.7%) respondents indicated they own an annuity within their employer-sponsored retirement plan, while 15.4% own one outside of their employer-sponsored retirement plan, and the majority (76.9%) do not own an annuity.
Asked if they think individuals can have retirement income that lasts throughout retirement without owning an annuity, more than one-quarter (26.9%) said yes, while 11.5% said not, and 61.5% said it depends on their retirement savings situation.
Among those respondents who chose to leave verbatim comments, the majority seemed to be pro-annuity, while a few offered insight into how to have retirement income that lasts without owning an annuity. A couple of respondents said annuities have fees that are too high, and several mentioned that a defined benefit (DB) plan is the best source of annuitized income for retirees. Editor’s Choice goes to the reader who said: “Defined Benefit plans are unequalled for providing lifetime income with maximum efficiency.”
Thanks to all who participated in the survey!
Verbatim
My parents retired in 2006, bought an annuity and thought they had made a mistake. About 3 years later they realized they were lucky. My mother-in-law who does not even have a GED lost her husband in 2015. She bought an annuity and is living more comfortably than she expected. I think if you have the financial know how, you can pull it off without an annuity. But most people don't have the skills necessary to do that.
Should be easy to just have a decent 60%/40% split portfolio and take 4% withdrawals on it.
I think annuities are an important part of a well-rounded portfolio.
Annuities = too many fees. I also work for an employer who provides a pension.
Annuities have too high fees built in. A retiree would be better off paying an adviser to develop a withdrawal plan.
I do believe it is possible for individuals to have retirement income that lasts without owning an annuity. However it requires the person to invest in assets such as rental property that will provide a continued revenue stream during retirement. My father did this and as a result, he and my mom traveled, enjoyed retirement, paid for family trips, gave generously to their church and we had money to handle all medical care in the final days of their lives, with most of their cash retirement savings still in their investment accounts. Dad and mom lived by the rule of living below their means, saving and giving at least 10% to their local church. They invested wisely both in the market and in real estate assets that gave them the retirement income they needed. They are an example of two people coming from poor farming backgrounds that cared for their parents in their final days, lived a rich and happy life, and left me and my sister a wonderful legacy of family love, and faith in God.
Defined Benefit plans are unequalled for providing lifetime income with maximum efficiency.
They do give a sense of security which is missing without a pension plan.
When I win the lottery, I will get an annuity. That's the only time I can afford to have my money tied up.
My employer has a frozen DB cash balance plan and I will take that benefit in an annuity. I think you need both an annuity to protect against living too long and equity investments as a hedge against inflation.
An Immediate Annuity is the only legitimate annuity type that anyone should purchase, however, an Immediate Annuity does not adjust annually for inflation.........hence, the annuitant's buying power is devalued as the cost of living index goes up. For this reason, I don't believe that retirement income at a "liveable level" will last throughout retirement with an annuity.
While an annuity is 100% guarantee to have income that lasts your entire lifetime, there are also some great spend down strategies that will work as well. Of course, you may have a surplus at the end of your life and realized you could have spent more. But that's not such a bad thing.
With the trend toward fewer traditional pension plans, it seems logical there would be more interest in annuities but it seems there is a lot of misunderstanding and anti-annuity soundbites that scare people away before they even understand the concept that they can purchase a lifetime income stream.
Nothing beats having peace of mind having a lifetime monthly income with an annuity.
NOTE: Responses reflect the opinions of individual readers and not necessarily the stance of Strategic Insight or its affiliates.