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Welcome again to “Ask an Advisor,” the recommendation column the place actual monetary professionals reply questions from actual folks. The subject may be something on this planet of finance, from retirement to taxes to wealth administration — and even recommendation on advising.
This week, we’re taking a distinct method as soon as once more: The query comes not from an advisor or shopper, however from yours actually, Monetary Planning retirement reporter Nathan Place. Here is my query:
Of all of the subjects I cowl in my beat, few are as polarizing as annuities. The merchandise provoke sturdy emotions, each optimistic and damaging; advisors appear to like them or hate them.
At first look, annuities do not appear that controversial. Bought by insurance coverage firms, they supply a pension-like revenue to the purchaser throughout retirement. And in latest months, they have been booming: In the summertime of 2022, annuity gross sales reached $80.7 billion — their highest quarterly complete ever recorded. This shattered the earlier file, which had been set only one quarter earlier.
However, many think about annuities excessively advanced and costly, or complain that they are “offered” to shoppers quite than demanded by them — typically with out the shopper’s full understanding. The merchandise’ defenders counter that right this moment there are many cheaper, less complicated annuities, and the hidden charges of yesteryear are an outdated stereotype. And the controversy goes on.
My query is easy: The place do you stand on annuities? Are they ever a superb possibility for shoppers getting ready for retirement? Does it rely upon sure components, just like the age of the shopper or the kind of annuity? Or are these merchandise simply no good?
Here is what advisors wrote again:
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