Variable Annuities are Bad, Bad, Bad!

I’m sure you have read or heard that Variable Annuities are bad. Isn’t that what we all hear from the financial press on a regular basis? My last post “Guaranteed Income For Life for Baby Boomers” showed a video of distinguished Professor John Huggard enthusiastically promoting the benefits of Living Benefit Variable Annuities.

Why would a highly respected and distinguished Professor spend much of his working live studying LBVA’s if they were as terrible as the financial press keep telling us.

This Post isn’t about LBVA’s but it is about how we often take the line of least resistance by taking our favourite financial writers comments as fact and write off what may be a good investment for us. Baby Boomers need to fight this financial prejudice so they don’t miss out on what might be the right retirement investment vehicle for them.

In his video on Living Benefit Variable Annuities John Huggard said LBVA’s are relatively cheap right now as there is a lot of competition out there. But once these companies have their market share you can be sure costs will go up. More to the point though benefits will go down. This is all part of a financial product market cycle. Right now it appears that insurance companies want to get some of the Baby Boomer retirement funds and want to do it through annuities.

In order to make them attractive and overcome the prejudice towards annuities they have to offer some carrots. As I said earlier, once they have got their market share you can be sure prices will increase and benefits will be lowered. That’s just the way things are.

But it means if you bother to take a look at the new products you can use the competition to your advantage.

It’s like the Japanese cars invasion of the 60’s. They were cheap and had lots of extras as standard features. Soon they had market share and all your neighbours had one in their driveway. If you are like me, that’s probably when you decided to buy one even though it was now much more expensive. Does that happen to you too 😉

Don’t let that happen to you on any retirement investment product though. Whenever the consensus of the general financial press is saying an investment is bad that should be a red flag. Immediately find out the facts from experts like John Huggard in VA’s and others in their chosen field. Get the facts because it could be the opportunity you are looking for. First in – Best Dressed as they say.

Here is an example of bad press, “The worst retirement investment you can make

It may be that there are some problems but it might also be that the writer does not have the latest information, is not an annuity expert, or was under pressure to get the article to the publisher. The writer might also be correct on a particular investment being bad. You need to find out.

Each and every investment product can be and is to some extent cyclical and is vying for market share and your retirement nest egg. Insurance Companies, Mutual Funds, Index Funds and ETF providers all have marketing budgets and have to continually come up with new and better products to entice investors. Everything is in flux. So don’t write one investment off due to out of date information, bad press, or earlier bad products that may no longer exist.

Protect your nest egg by being informed about the investment choices open to you as Baby Boomers.

2 Responses to “Variable Annuities are Bad, Bad, Bad!”

  1. Paul says:

    Jeffrey Voudrie website (http://www.guardingyourwealth.net/) has information on Variable Annuities that is also eye opening.

  2. admin says:

    Hi Paul,

    I read Jeff’s article and it is very general. I’d probably side with John Huggard who is a long time researcher into living benefit variable annuities.

    Whilst I do believe Jeff has an excellent approach to managing a Baby Boomer nest Egg using his proprietary system I do not believe he has done sufficient in-depth research on these annuities to provide advise.

    Therefore I think the article comes across as, “don’t buy annuities but use my proprietary system to manage your money”.

    I’d just question him further using John Huggard’s book before taking the advice in this article and possible ignoring something that might be of benefit in the long term.

    David

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