Late last year, Citywire published an article, “Attack of the Annuities!”, with which we disagreed on some of the main points. We responded with a blog post explaining our position, and RetireOne CEO and co-founder, David Stone, had more to say on the subject. In mid-April, ThinkAdvisor published his article, “Is the Attack on Annuities Still Fair?”
David argues that many of the objections quoted in the original Citywire story are from an earlier time, when there were significant, legitimate problems with how annuities were structured. People who still object to annuities likely haven’t updated their thinking, or explored how technology has changed how annuities work. Even with a decade or more of innovation, annuities are sometimes still painted with a broad brush, as if they’re all functionally the same, and they sometimes even get lumped in with investments and compared directly to them.
But the tide seems to be turning, or perhaps it started turning a while ago. Despite what articles that criticize annuities might suggest, general sentiment about annuities is not as wholly negative as it once was. Many advisors are open to using them, as our 2021 survey of fiduciaries discovered, and advisors are becoming increasingly aware that comparing annuities to investments is an apples and oranges exercise, because annuities are insurance. David says:
Like all insurance, annuities are designed to protect, not attack. They offer protection against financial downturns, sequence risk, and diminished spending power in retirement. Their intent is to take some of the uncertainty and risk out of retirement, so retirees can have the security of guaranteed income when their earning years are over. If anything, annuities attack risk, and ultimately, uncertainty.