Understanding Annuities: Myth vs. Reality

Transcript

Hi, I’m Brent with Scottsdale Wealth Advisory. If you’ve ever Googled the word “annuity,” you’ve probably seen it all: glowing reviews, horror stories, and everything in between.

No wonder people are confused. The truth is, annuities are one of the most misunderstood tools in retirement planning. In this video, I’m going to walk you through some of the biggest myths I hear from clients and clear up a few of the facts, so you can decide if an annuity might have a place in your plan.

Annuity Beneficiary Myths: Does the Insurance Company Keep Your Money?

Let’s start with the myth I hear all the time: “If I buy an annuity, the insurance company keeps my money when I die.” This is simply not true.

Most annuities let you name a beneficiary. That way, if something happens to you, the remaining value or income continues to your spouse or your family. You can even choose joint life options or refund provisions to make sure your money stays in the family.

Annuity Costs and Fees: Are All Annuities Expensive?

Here’s another one I hear often, especially from people who’ve read negative headlines: “Annuities are expensive.” 

Some annuities, especially variable annuities, can have higher fees. But many fixed and fixed indexed annuities have no annual fees at all, unless you add an optional benefit. The key is working with someone who shows you exactly what you’re paying for and makes sure the type of annuity you choose meets your goals.

Access to Funds: Do You Lose Liquidity With Annuities?

This next one is probably the biggest misunderstanding around how annuities work: “I lose access to my money.” Annuities are designed for income, not short-term liquidity.

But most contracts allow partial withdrawals each year without a penalty. And once the surrender period ends, you typically have full access to that capital. So, no, you’re not locking your money away forever; it’s just important to use annuities for the right purpose.

Inflation and Income Growth: Can Annuities Adjust Over Time?

Here’s one I hear from people worried about rising costs in retirement: “Annuities don’t keep up with inflation.” 

Older annuities didn’t, but today, many contracts offer inflation riders, income step-ups, or market-linked growth. In other words, you can build a retirement income stream that adjusts over time, especially with indexed annuities that offer upside potential without the risk of market losses.

Insurance Company Risk: What Happens if the Company Fails?

And finally, this myth usually comes from people who are skeptical about insurance companies in general: “If the insurance company fails, I lose everything.”

Insurance companies are heavily regulated, they’re required to keep strong reserves, and there are multiple layers of protection, including state guarantee associations. While no product is risk-free, the idea you’ll lose everything is more myth than reality. Working with solid, reputable companies makes a big difference.

Annuities in Retirement Strategy: Just a Tool, Not a One-Size-Fits-All

Here’s the reality: annuities aren’t good or bad, they’re just tools. And like any tool, it’s all about how and when you use them. For many of our clients, annuities provide something that’s hard to find elsewhere: stable, predictable income, no matter what the market’s doing.

Want a Second Opinion on Your Annuity?

If you’re curious whether an annuity might make sense for you, or you already own one and want a second opinion, I’m happy to take a look and walk you through your options. 

Thanks for watching, I’ll see you in the next video.