Why Do Regulators Want You to Have Less Money?

When you're helping clients plan and prepare for retirement, you often are exploring various options for producing consistent income from their pool of assets. Each person's ability to produce that income and the desires they have for that income are vastly different. Something we encountered recently made us face obstacles that we haven't in recent years. With the rise of interest rates over the last few months, annuities and, more specifically, income annuities have come back to the forefront. For the past 10+ years, income annuities have not produced compelling outcomes. To be clear, they worked as they always do--pay an amount to an insurance company in exchange for a guaranteed income stream that lasts until you die. That's a very boiled-down explanation of how they work, but that's the basic idea.  While interest rates were incredibly low following the great recession in 2008, income annuities weren't all that compelling because there is an interest rate factor applied to the income stream. Now that rates have risen, those interest rate factors have as well, thus making the income streams much more compelling.  But the tradeoff for the client is that you are trading liquidity (availability to access your cash) for the certainty of a guaranteed income stream. And the compliance department is very concerned about that. So much so that we, as insurance agents, are required to make sure that our clients know of ALL the other things they could instead of buying an annuity.  Obviously, we have no issue with that, and we have that discussion with our clients anyway. In fact, if we are showing our clients an annuity with a guaranteed income stream, we've already discussed all of their options. But in the financial services world, we are the only group of people who are required to educate our clients about their other options. For example, a financial adviser (aka investment adviser) has no such obligation to educate their clients about annuities.  In today's episode, we talk about how regulators have forced us to present options that open our clients up to more risk, uncertainty, and potentially less income during retirement. _________________________________________ If you listen to this and are wondering how an income annuity might provide you with some security during retirement, please click right here to get in touch with us. It's worth exploring this option, things are looking better than we've seen them in a very long time. Seize the opportunity to lock in a higher guaranteed income stream while you can.