"People love to talk about retirement but not retirement planning."
That epigram was delivered by Carolyn Johnson of Voya during the Insured Retirement Institute's annual meeting in Colorado Springs earlier this week. The CEO of insurance solutions was a member of the Capitalizing on Chaos panel that opened the first full day of the conference.
The discussion was supposed to be oriented toward the future but focused quite a bit on how we got where we are. Basically, it is not so easy to look beyond the chaos.
But Johnson put her finger on a persistent problem with annuities. People like what annuities do but not so much annuities themselves.
Tell people of a certain age that they could have a guaranteed income of a certain amount for the rest of their lives and they will ask, "Where do I sign?" But tell them, "Right here on the line that is dotted" and they'll say, "But that's an annuity!"
Alrighty then, take your dollars, put them down on Red 21 and keep your eye on the Dow. Yes, that's a bit simplistic. People are understandably anxious about handing this stack of money to an insurance company on a promise that they will hit the "cha-ching!" somewhere down the line.
"What if I die and never collect?" Well, what are you going to do, spin around in your grave about it? People can arrange for heirs to collect in some way, but that costs.
(I always liked John Olsen's theory of annuities as an asset that people would buy. You would buy a car because it can traverse roads to where you want to go -- not a car-boat in case you also wanted to use it to sail. Although that would be kind of cool.)
"What if you live and run out of money at 75 with another 25 years to live?" That's the greater possibility. Greater still is the prospect of medical expenses taking away every dime, not just the ones that could have been plunked in an annuity.
This is not to say that everybody should have an annuity. That's what advising is all about. And that's where the problem is.
We still have agents whose mission is to sell everybody an annuity. They size up prospects for how much annuity they can afford, rather than what is best for them. So, we have regulators and legislators trying to straighten out the industry with a hammer.
It can't be all about selling. And that's not just regulators and the Cult of Fiduciary talking but companies, too. Paula Nelson, of Global Atlantic said on another panel that products will be simpler rather than sexier.
"Gimmicks will go away," Nelson said. "They draw negative attention."
Doing the right thing will pay. Just like annuities shone during the Great Recession, they will stand strong during the Great Regression as boomers toddle into their second childhood.
No time was better than the present for annuities. We just need to be able to talk about planning for the best, rather than dwelling on the worst.
Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers, magazines and insurance periodicals. He was also vice president of communications for an insurance agents’ association. Steve can be reached at [email protected].
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