Warren Buffett and BlackRock's Insights on Annuities
Warren Buffett's first rule of investing is don't lose what you already have. His second rule? Don't forget the first rule.
It took 2 full years for the S&P to get back to the all-time high it set in January of 2022, but it roared in 2024 to the tune of a 25% return. Now is the time to take some cream off the top for those near or recently retired and purchase an annuity to provide a significant stream of guaranteed lifetime income.
BlackRock recently released "The Psychology of investing: How Advisors can Support Their Clients" and discussed the common behavioral biases of investors. Several points in this article tie into how a guaranteed lifetime income annuity can positively benefit client psychology. You can read the full article HERE
FOMO and The Lottery Effect: Fixating on the money they could have made from the best performing stock, fund, or index.
Loss Aversion: Investors tend to feel the pain of a loss far more than the pleasure of a gain.
Action Bias: The tendency for investors to feel the need to "do something" to protect their money, particularly during volatile periods. This can lead to poor timing and missed opportunities (selling low and buying high).
Returns are still important, but the main goal in retirement planning is to help people live their dream retirement and stay retired. It has been proven that having a monthly paycheck in addition to Social Security leads to retirees being happier and spending more. I wrote about this study back in October of 2024, and you can read it HERE A monthly paycheck outside of Social Security can alleviate the pain of a loss, help clients focus on the big picture, and allows advisors to continue managing assets in the market that align with the long-term strategy.
Spotlight Client Solution*
Turn $100k into $12k of Income at Full Retirement Age
Corebridge's Power Select Plus Income tops the charts for deferred guaranteed income. A 60 year old can deposit $100k and start receiving $12,441 of income annually at age 67. If they live to age 90 and don't use the annuity, they'd need to earn a net average annual return of 6.65% in the market to match Corebridge's guaranteed cash flow.
A rated carrier.
$300k total income received at age 90.
6.65% IRR at age 90.
Notable Client Solutions*
8% Immediate Payout at RMD Age
There are several products providing an 8% immediate payout at age 73. A guaranteed lifetime income annuity can be an excellent solution for a portion of clients IRA assets.
Satisfies RMD on 2x the amount deposited.
Reduces future total RMDs since the annuity cash value will decrease.
Provides an additional paycheck that can't be outlived.
5.40% Guaranteed Rate for 5 Years*
Athene's guaranteed rate annuity (MYGA) provides a fixed rate of 5.40% compound for 5 years.
Athene is A+ rated, provides excellent service, and their product offers interest liquidity each year.
*Rates may be subject to premium banding. Products may not be available in all states. Replacement must be suitable and meet all requirements.