Annuities offer retirees a guaranteed income stream - but only if you pick the right one. – For decades, a company pension was the bedrock of a comfortable retirement. Today, for most American workers, it’s a relic of the past. With 401(k)s and IRAs left to fill the void, millions of people nearing retirement are asking the same question: how do I guarantee I won’t run out of money?
Joe Vitale, owner of Vitale Wealth Management, says the answer has been hiding in plain sight - and he’s put his own money on it. “I took a couple hundred personally of myself, and I just put it into an income annuity where when I want to turn it on at 62 or 65, I have a guaranteed lifetime income that I’ll never outlive,” he said.
The product Vitale is referring to - a guaranteed lifetime income annuity - is not new. But he argues there has rarely been a better moment to buy one. With the Federal Reserve’s rate hikes still reverberating through financial markets, Vitale says the timing is unusually favorable. “Because interest rates are so high right now, we’re able to lock into a higher payout factor,” he said.
Annuities have long carried a reputation for complexity and hidden costs, a stigma Vitale acknowledges is sometimes deserved. The key distinction, he says, is between advisors who are legally required to act in a client’s best interest - fiduciaries - and those who are not. “As a fiduciary, I always ask, make sure that they’re upfront telling you what the fees are,” he said, noting that some fixed and fixed-index annuities carry zero fees, while variable products can carry significant costs if buyers aren’t careful.
For skeptics, Vitale draws a pointed comparison to bonds - a traditional safe-haven asset that comes with its own risks and costs. “What if I can get a 5% rate of return with no risk and no fees and no volatility, and I can have a guaranteed income like a pension? Why wouldn’t I put that in a retirement program for safety?” he said.
His enthusiasm comes with a clear caveat, however. Annuities are not meant to be an all-or-nothing bet, and Vitale is quick to say so. “You don’t put all your money in there, but your portion,” he said. “Perfect place for a portion of the money.”
For those already holding an annuity purchased years ago, Vitale recommends a complimentary evaluation, pointing out that products bought when rates were lower may no longer be competitive in today’s environment.
More information is available at VitalityWealth.com.