What Should You Look For In A Retirement Plan? Gold piggy bank from pixaby.com

As posted on Forbes

Most Retirees Need an Annuity

If you have a defined benefit pension, you already have an annuity and may not need another. The only other substitute for an annuity is sufficient wealth relative to your plans and needs that you don’t need a retirement plan — you can spend what you like when you like with no risk of ever running out. This article and those that will follow aim at the much larger group of retirees, or soon-to-be retirees, who have limited wealth that requires careful management. They need an annuity to eliminate the risk of running out of funds, while avoiding excessive bequests to their estates.

Overcoming The Bias Against Annuities

Many retirement advisors avoid annuities because the rate of return on annuities is low relative to the return that the advisors are confident they can earn on the funds used to purchase an annuity. The average return on a diversified portfolio of common stock during 985 5-year periods during 1926-2012 was 8.6% whereas annuity yields are generally in the 3-5% range.

Read the full article