Even Einstein Was Confused: Myth Busting Annuities

    By | Small Business

    Myth 1: Even Einstein couldn’t understand how annuities work.

    What’s to understand? You pay in money, it gains interest and then you get more back in retirement, either in one lump sum or as a series of payments. Think of it as a reverse life insurance policy. It’s not rocket science; it’s just simple retirement planning.

    Myth 2: Annuities are riddled with hidden fees and commissions.

    Annuities are a straightforward financial proposition, not some shady deal with loan sharks in a back alley. A fixed annuity has no fees or costs that you don’t take care of up front right at the beginning of the transaction. A variable annuity is a different matter; they are more like mutual funds. And that’s why Don Orban, CEO of RetireIowa makes it clear, “I don’t advise variable annuities as part of your portfolio.”

    Myth 3: What about an emergency? Can I get anything out, if I need it?

    Most annuities allow you to access up to ten percent of your premium each year with absolutely no penalty at all. So you always have access to some emergency funds for that root canal or trip to Las Vegas. You can also access the full amount of your annuity, but a fee may apply if you haven’t given the contract time to mature.

    Myth 4: If you’ve seen one annuity, you’ve seen them all. One size fits all.

    No two annuities are the same. They come with different features and benefits, which only YOU can decide are either right for you or not. A partial listing would include: individual annuities, group annuities, immediate annuities, deferred annuities, single premium or installment premiums, fixed annuities and variable annuities. The list goes on. In this case, variety is a good thing for you as the consumer because you can fine-tune your annuity to get it just the way you want.

    Myth 5: Why should I leave my money to some annuity company if I die early?

    It doesn’t work like that. When you sign the annuity contract you specify who you want to leave any remaining principle to in the event of your death, such as your spouse, children, charity or pet cockatoo. In other words, you get to name a beneficiary.

    Myth 6: I might lose my shirt on this!

    Wrong. A fixed or fixed indexed annuity is protected much like your bank account. The stock market can plummet into a black hole, and you’re investment is still safe and secure. Now that’s NOT the case with a variable annuity. Variable annuities can fluctuate like a mutual fund. That’s why Don at RetireIowa doesn’t recommend them in retirement.

    Myth 7: I won’t live long enough to collect on an annuity anyway.

    Today’s Americans live longer than ever. That means your No. 1 financial risk is the possibility of outliving your money, and Maui is no place for a pauper!

    In all seriousness, although the topic of annuities can be dry and somewhat complicated, you can really benefit from looking into them, now or in retirement. Every good business man or woman has the need to prepare for future events in their business and in their personal lives.

    This article was syndicated from Business 2 Community: Even Einstein Was Confused: Myth Busting Annuities

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