Financial Advisor

Annuities During Economic Uncertainty

In March, a survey of people between the ages of 61 and 65 found that those who have secured guaranteed retirement income were less likely to alter strategies (or their portfolios) during the current market volatility. That doesn’t mean they weren’t worried.

“Though 61% said they’re concerned about the volatility, those with pensions or annuities—that is, protected lifetime income—were far more at ease and aren’t making changes to their portfolios,” says Mike Harris, senior education advisor at the Alliance for Lifetime Income, which conducted the study.

But are they right? Shouldn’t advisors be telling them to stay the course?

“This is great advice for clients with longer investment horizons who have the ability to endure market cycles, to delay retirement or start saving more, but not all clients have those luxuries,” says David Lau, founder and CEO of DPL Financial Partners in Louisville, Ky., which works with RIAs to identify low-cost, commission-free annuities and life insurance products. “For someone retiring into this market where they may have seen their assets drop by 30%, the impact is devasting to their financial plan.”

The Dangers Of Investment-Only Portfolios

It’s especially devastating, of course, for clients with investment-only portfolios. Lau says many advisors have pushed clients into risky income-generating investments to counter the low interest rates of traditional retirement income generators such as Treasurys and “AAA” corporate bonds. “So when we experience a market event like we are today, retirees’ portfolios are impacted like never before,” he argues.

Read more at FA Mag