Keep Annuities Simple When Selling To Boomers
By Bill Fay
Buying an annuity these days feels like dining out at one of the 1,000 or so franchise restaurants in my town.
When you walk in, they hand you a menu that reads like a novel, when all you really wanted was steak and potatoes. You fumble through the 100 combinations of this and that, and everyone smiles because “there are so many great choices!”
Then the waitress shows up and panic hits you because you can’t understand any of what you’re reading. You forget about steak and potatoes and stab a finger at something that sounds good and hope for the best. When the combo chicken, beef and shrimp burrito with extra salsa, melted pepper jack cheese and habanero peppers arrives at the table, you ask yourself: Did I do the right thing?
Check, please!
Buying an annuity shouldn’t feel like that, but with so many variables and explanations of variables becoming part of the pitch, sometimes it does.
The tried-and-true choices – straightforward fixed or immediate annuities – have taken on a garden variety plainness and they’re often overlooked. Apparently, knowing exactly what the return from your investment is going to be – guaranteed! – doesn’t mean what it used to.
It certainly isn’t as sexy as a deferred variable annuity with so many riders attached that you wonder if you’ll need a bus to get it home. Who doesn’t think they’ve made a really good investment when it includes riders for spousal, death, minimum income, minimal withdrawal and lifetime withdrawal benefits – all guaranteed.
Check, please!
Keep It Simple
So how do you satisfy America’s appetite for variety, without making it so excessive that nobody really knows what they just bought? Simplify things.
It starts with reminding clients of the real purpose behind annuities. They aren’t supposed to gallop up and down in value like stocks or mutual funds. Annuities are meant to ensure retirees an income stream for the rest of their lives. They provide peace of mind to people worried about outliving their resources.
That should be a legitimate pitch to the baby boomer generation heading into retirement now and for the next 15 years or so. Boomers are barreling through the retirement gate at the rate of 10,000 a day. They’ve lived a life filled with more choices and opportunities than any generation in history. Then along came the Great Recession -- and the sudden realization that the good times aren’t always going to roll.
There also was the news from the Social Security Administration that people are living longer, a lot longer. A man turning 65 today can expect to live until he’s 84. A woman who turns 65 can expect to live to 86. More than 33 percent of them will live past 90.
Can the average boomer finance an extra 19-21 years (or more) of his or her life without a job? A guaranteed income for the rest of their lives should sound pretty good to this group.
That is what makes annuities attractive to boomers, especially if they understand what they’re buying. No other investment can guarantee you an income for the rest of your life. You can’t plunk $100,000 down on a big-name stock like Ford or Microsoft and get back a guaranteed revenue stream for 10 or 20 or 30 years from now.
Guarantees You Can Make
Annuities can. The charts, graphics and brochures that insurance companies have available to explain their products are incredibly well done. Even stockbrokers acknowledge that. The products – fixed, immediate or variable – are predictable and reliable, as long as the company backing them is well grounded.
So keep it simple. Stress the easy-to-understand positives behind investing in annuities – a steady stream of income, guaranteed! – and show how valuable that part of a retirement portfolio can be.
Leave the hundreds of choices to others when steak and potatoes will do just fine.
Bill Fay is a business writer, focused mainly on stories about financial matters affecting families and small businesses. He works as a content writer for Annuity.org, where his primary focus is personal finance. Bill may be contacted at [email protected].
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