Yet annuities don't seem popular with a lot of financial planners and money managers. The reason is that "you've given up your asset, it's gone," said Greg Mortenson, a founding partner of Edina-based Capstone Advisory Group.
Simply put, people in retirement may have the monthly budget covered but can find themselves with a medical problem Medicare won't fully cover or a relative in need of help. If most of the savings went to the insurance company, another check may be coming next month but the crisis is today.
Mortenson has also met plenty of people nearing retirement who seem anxious about their finances, even those who seem to have enough.
Part of their problem, he said, is that they are awash in far too much information, with round-the-clock headlines on financial markets.
The stock market is near its highs, "but they remember 2000 to 2002 and they certainly remember 2008," he said, and the brutal bear market in stocks associated with the Great Recession.
His firm's approach to helping clients worry less is to show them how they can generate income without giving up a big piece of their savings.
He and his colleagues carefully assess how much a client's family needs per month in retirement and the minimum return they would need to get from their 401(k) accounts and other savings plans.
In most cases clients can see how they can even afford to move some money out of riskier assets like stocks and still generate enough investment gains to cover their monthly needs.
"So we try to assuage some of that fear, by saying, 'You don't need all that risk,'?" he said. "?'All we need to do is make sure you don't run out of money.'?"
For the worriers among us -- and remember, this is most of us -- there seems in this case to be a choice between worrying about the market risks in a portfolio or trying to lock in an income stream with an insurance company and then worrying about not having the savings your family might need.
I see a role for annuities for people who could really use some security. There are annuities, though, that seem to be invented-in-a-lab hybrids that are a cross between a mutual fund investment and an insurance policy. Some skepticism toward those seems healthy.
My advice is rarely about financial products, though, and more about how to feel better about the money people have right now. One can't-miss approach is simply to give more of it away. Yes, that seems counterintuitive, but the old wisdom on generosity has gotten academic support of late.
I also routinely advise people to make sure money is routinely set aside and invested and then just not worry so much about worrying. It turns out humans are natural-born worriers, a hard-wired trait that came from the most successful of our prehistoric ancestors. To get through the day they had to be carefully attuned to all the threats around them. The careless and carefree? Their lineage dead-ended a very long time ago.
So when it comes to your money, feel free to worry a little. It's one of the things that's kept you alive this long.
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