Annuities: Good or Bad?

People want yes/no, black and white answers.  The truth about annuities is that you will get a guaranteed return in the form of an eventual or immediate income, but not a great return.  So, if the stock market is best in the long run, why bother with annuities? The answer is this:  Predicting the future losses or returns for stock, realty, bond, gold, etc. is impossible. Yet you MUST have income that — at least — meets your expenditures.  All of your expenditures?  No, not discretionary ones; just living expenses.  Do people need annuities, such as pension, Social Security, or private annuities?  Yes; again, here is why:  It is prudent to match your guaranteed-to-pay-out expenses with guaranteed-to-receive income.  Selling off lots of shares when the market is down to get the needed income forces you to fail to recover well from a downturn, and there is serious danger of exhausting assets during life.  So, this simple equation can examine your basic expenses or all, as you may desire, but it is very — very — imprudent to risk not being able to pay your basic living expenses just because the at-risk investments probably will get a better return over the long haul. You might not have the long haul to recover from a stock downturn, either!  Your advisor should be able to convert your “minimum income” requirement to an amount that must be provided from guaranteed sources (pension, Social Security and private annuities). That calculation provides you with the amount that MUST be in an annuity, given reliable payout rates.  The remainder of your investable funds should be at the risk level that is reasonable for you, personally.  In summary, many will want more than the minimum needed for this “prudence” and many will want no money in annuities. But the fact remains that there is a method for determining this, independent of biased and generalized opinions.

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Dan Gallagher

Overview: Dan retired from financial services in December 2017 to work professionally as a writer, freelancer, speaker and educator. This is curtailed due to spine problems. During his practice, Dan’s professional designations included: Chartered Financial Consultant & Chartered Life Underwriter (1989), Certified Financial Planner® (1992) and Certified Business Intermediary (2002). Dan’s thirty-year financial practice encompassed group and individual benefits, money management, financial plans, business valuation & brokerage, commercial realty and – often very personal – counseling. He now relies on agent Bill Pettit to offer his works, especially fiction. Chronology: Dan graduated from Virginia Military Institute (1981), third among Economics majors, simultaneously completing the Modern Languages curriculum. He served in the Infantry, then as a reservist in a Special Forces support role, next as a Training Company Commander and later in a classified Army Research Institute role. Dan completed his Master of Business Administration at William & Mary (1986). He and wife Laura married in 1988, loved raising their four children, and assisted both Boy and Girl Scouting through their church through 2010. Dan has given numerous seminars at major employers and other entities including Delta Environmental Consultants (now Antea Group), Anheuser-Busch, Norfolk Naval Shipyard, Canon USA and small businesses. Charlotte Magazine selected Dan as a ‘2009 Five-star Wealth Manager.’ Dan was a panelist and guest speaker at the Charlotte Chamber of Commerce’s 2007 ‘Business Disposition Workshop.’ Dan is the author of a novel, a licensing manual, and numerous articles in journals such as Virginia Lawyers Weekly, Financial & Estate Planning, The Daily Press and The Virginia Gazette. Articles by and about Dan have also been published in the Charlotte Business Journal and Charlotte Ventures. His fiction and narrative nonfiction have been published by Skyhorse Publishing, Superversive Press, Millhaven Press, Creative Loafing, NFAA Archery (a humor short story), and Tuscany Bay Press.