Annuities Stop “Silver Tsunami”

Juan was driving down a country lane in his pickup when suddenly a chicken darted into the road in front of him. He slammed on his brakes, but realized that the chicken was speeding off down the road at about 30 miles an hour.

Intrigued, he tried to follow the bird with his truck, but he couldn’t catch up to the accelerating chicken. Seeing it turn into a small farm, Juan followed it.

To his astonishment, he realized that the chicken had three legs. Looking around the small farm, he noticed that ALL of the chickens had three legs.

The farmer came out of his house, and Juan said, “Three-legged chickens? That’s astonishing!”

The farmer replied, “Yep. I bred ‘em that way because I love drumsticks.”

Juan was curious. “How does a three-legged chicken taste?”

The farmer smiled. “Dunno. Haven’t been able to catch one yet!”

Renewed economic uncertainty is testing our generation-long love affair with the stock market.  With over 33.12 billion dollars withdrawn from the domestic stock market in the first seven months of this year, reminds me of the three legged chicken, you can’t catch it.

U.S. households lost trillions of dollars in the first few quarters of the economic and financial crisis of 2007, 2008, and 2009. Total wealth relative to after-tax income had fallen to its lowest level since March 1995.

This sharp drop likely had a severe effect on the retirement income security of millions of U.S. households.  Small investors have lost their appetite for risk.  Now many have stopped chasing the three legged chicken and are choosing investments that they deem safer, such as Annuities.

The last few years have altered American’s sense of financial security and the notion that stocks tend to be safe and profitable investments over time seems to have been dented in much the same way that the decline in home values and in job stability has occured.

Surveys and studies regularly report how unprepared U.S. adults are for retirement. The statistics are particularly bad (and sad) for baby boomers, with a majority typically admitting that they do not have enough money left after the decline in the market to retire.

Retirement is suppose to provide freedom from the routine bounded job, but at the same time, it also introduces the fear for the future as regular income stops coming.

Adding to those fears is the third leg of the chicken, a “Silver Tsunami” is gaining force. This is tempered by another worrying problem: The Medical advances in this country is an amazing success story in that people are now living longer, many into their high 90’s.  This is called, longevity risk, or the chance that a retiree will outlive his or her savings.

Just imagine that when you are 80 years old, in reasonably good health, and you have just spent your last penny of retirement savings. You have no other sources of income. For the rest of your life, you will rely on government handouts and the charity of others.

Trying to finance your retirement with the present market risks and with the probability of a decade of a continuing underperforming market will provide less-than-anticipated retirement income for many retirees. The New York Life and Wharton Business School collaborated on a study to find the most effective way to maximize retirement income. The determination was made that fixed annuities that convert to a lifetime stream of income proved to be one of the best ways to do that. 

Annuities are considered conservative, providing the ironclad guarantees and are the perfect investment for anyone who is interested in finding a low risk investment; particularly those who have just retired and are looking for a way to protect their retirement fund from the volatility of the market. 

Annuities will provide a steady stream of income with very little risk. In addition to receiving a steady income for life, you can count on receiving allowances for withdrawal without penalties, death benefits, and probate insurance.

Compared to stock market investments, an annuity portfolio provides you with a special peace of mind, in that, unlike the stock market, you don’t have to worry about which way the market is moving. You don’t have to know when to cash in for a gain, nor do you have to know when to sell and cut your losses.

An annuity portfolio bears:

·         No administrative fees,

·         No annual maintenance fees,

·         No upkeep expenses,

·         No buy or sell expenses,

·         No personal management of assets,

·         No people on retainers to manage assets,

·         No real estate taxes,

·         No repairs,

·         No zoning commissioner or city council to contend with,

·         No storms,

·         No droughts and

·         No public liabilities

The recession is a wake-up call for many Americans and their response is an appropriate one. By preparing for and navigating an economic downturn with smart planning, they are more likely to take the actions needed to achieve financial security no matter where they are starting from.  As Baby boomers approach retirement they are shifting away from stocks and mutual funds to annuities to provide regular guaranteed income for the years when they are no longer working.