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Barron’s Top 50 Annuities

By JLP | May 26, 2012

Given a dizzying number of features and restrictions, contracts for some annuities — variable and otherwise — can run 300 pages or more. And because each comes with its own small twists, these products can be very difficult to compare.

That—and the fact that annuities tend to pay a lot higher commissions than comparable mutual funds—is the main reason I’m not a fan of annuities.

That said, Barron’s has their annnual list of the 50 top annuities out today.

The market has changed:

“We’ve seen investment options in variable annuities diminished, guarantees brought down substantially and fees going up,” says Nigel Dally, an analyst at Morgan Stanley. “Protracted low interest rates and high volatility in the stock market have made it far more expensive for annuity companies to support their products.”

My thought: Stick with low-cost fixed immediate annuities. Put a portion of your assets in one or two fixed immediate annuities to give you some dependable monthly income and invest the rest of your assets in a conservative portfolio of stocks and bonds. It’s not rocket science but advisors try to make it that way to confuse and scare the hell out of people.

As far as the rest of annuities are concerned: BUYER BEWARE!

Happy Saturday!

Topics: Asset Allocation, Retirement Planning | 3 Comments »


3 Responses to “Barron’s Top 50 Annuities”

  1. Kirk Kinder Says:
    May 26th, 2012 at 7:37 am

    I may be biased being a fee-only planner who sees people who are dissatisfied with their financial products, but I rarely find folks with solid annuities. It is almost always high cost, and the clients rarely understand the product. They cling to certain pitches the salesman made, but aren’t in the contract language. Usually, there is a short term guaranteed return that the client believed was for the duration of the contract.

    I agree with JLP that fixed immediate annuities are the way to go if you want that “guaranteed” income. (I am waiting for an insurance company to fold due to inadequate reserves and poor portfolio management). Focus on costs – usually I recommend Vanguard or Ameritas Direct. If you can avoid a salesman, you avoid a big expense.

  2. JLP Says:
    May 26th, 2012 at 8:20 am

    I’d be willing to bet that most annuity salesmen don’t understand the product. A lot of times they work for one company and pitch one product and their goal is to simply put people into that product.

  3. JM Says:
    May 26th, 2012 at 9:01 am

    JLP you are correct. I work for one of the top insurance carriers and I see my peers fumble when it comes to the nuts and bolts of our product. However, I don’t agree that clients should skip the advisor and I think there are still (for now) a few good variable annuities out there that offer the guarantees.

    Not putting one’s eggs all in the same basket also applies to one’s annuity planning. I would imagine the fees aren’t as big an issue as putting all or most of ones money into an annuity. We all know there are plenty of FA’s out there who will take all the money they can and stuff it into the annuity.

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