Page 80 - Ready Set Retire

Stephen J. Kelley

payout of up to 10% per year and it’s guaranteed to last your
lifetime no matter what, who wouldn’t choose the guarantees?
Only about 14% of people do, though most workers would
choose a pension if presented the opportunity.

Why the disparity? When you pitch a personal pension to
people and frame it as three times the income, guaranteed for
life, people love the idea. But when they find out the name of
the plan is spelled “annuity,” they often back off in a hurry?
The primary reason for this, I believe, is the very negative bias
of annuities by people who manage money. Why the bias?
Largely because once money goes into an annuity, it is no
longer available for the manager to collect fees on. Yes, they
often offer generous commissions (that do not come out of
the client’s money), but normally when a retirement plan
includes and annuity, that money is never available again to
charge a fee on.

Even though the benefits of regular and predictable income
are clear, the opposing forces have poisoned the well, thereby
damaging many retirees’ lives. That has also been true of taxes.
Planners don’t talk about it, other than to load clients down in
tax-deferred time bombs, largely because they are traps and
keep clients’ money in the advisors’ hands.

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