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Tuesday, December 7, 2010
In "Top Ten Tips for a Financially Safe Retirement," Tim Begany lists "An Immediate Fixed Annuity" as number 1.
This is interesting because it is how you convert today's 401(k)s/IRAs etc. into your father's pension plan. In other words, there is no need to sit around whining that we no longer have pension plans like in the past.
It is interesting also in that most people who use a financial planner will never have had the option presented to them - even by fee-only RIAs who puff themselves up proclaiming their fiduciary status. Why is that? It is simple - if you put the money into an immediate pay fixed annuity, the RIA won't have the funds to invest for you; and investing your money is where they make their money.
Imagine people who retired in 2007, when yields were higher, and before the sharp downturn in the market. Instead of going through that traumatic experience with their retirement on the line, they could have locked in a lifetime income stream of payments greater than that available today. Shouldn't their financial planner have suggested this for at least a portion of their retirement assets?