Last week, Barron’s came out with this article claiming they found the best annuities. Honestly, I thought the page would be blank. Like, calling something the “best annuity” is kinda like saying, “Hey, here’s the best stomach flu!” Seriously?
Anyway, Barron’s tried to be all positive about these—we’ll call them—less-than-awesome products. Sure, they did say annuities have high fees, which is putting it mildly.
So, annuities can give you a guaranteed payout every year. Could be now, could be later. If you want some thrill, gamble on variable annuities—they dance to the stock market tunes. Think you’re safe with them? They limit losses but cap gains too. Imagine the market goes up 23% but you’re stuck with only 10%. Ugh, talk about FOMO!
Numbers don’t lie. The market’s been up three-quarters of the time, averaging above 21% when it’s soaring. But oh boy, when it crashes, it’s a 14% nose dive.
Picture this—if casinos in Vegas offered a game with a 21% gain three times out of four and a 14% loss the other time… people would be lining up for days! Then some guy comes around offering you a “sure” 6% or a 10% win with a 5% loss cap. Would you bite? Probably not.
Yet, annuities are this hot thing. Why? Great marketing, I’d say. Investors freak out when they hear “stock market.” So, last year, $434 billion in annuities flew off the shelves. Bananas, right?
Yeah, markets crash sometimes. Scary stuff, especially near retirement. But look, average bear markets last less than ten months. Can’t handle that dip? Think cash or bonds instead.
Let’s rewind to 2016. The Department of Labor had this rule—advisors sell what’s best for clients. Annuity sales? They plummeted 16%, variable ones down 22% too. Fast forward two years, the rule vanished, and guess what? Sales shot up 40%.
Read between the lines there. Some folks do like their annuities for the stability. Hats off to them—I mean, dumping them comes with massive fees anyway.
Yet for the rest of us, sticking with the market and shoving some cash into bonds or savings is smarter. No hefty fees, lots more potential gains. Way to balance out those down years.
Annuities are pricey, confusing, and underwhelming when compared to solid market strategies. Seriously, think twice before diving into them.
