Commentary on an excerpt from the Bloomberg article
, “Delay Taking Social Security, Add Annuity to Survive Retirement, GAO Says,” By Margaret Collins, July 1, 2011.
Commentary in italics
Retirees may have to delay Social Security benefits
and buy an annuity
to have enough money for retirement, said a U.S. government study.
“The risk that retirees will outlive their assets is a growing challenge,” according to a study from the Government Accountability Office released today. Increased life expectancies and health care costs coupled with declines in financial markets and home equity over the last few years have “intensified” workers’ concerns about how to manage their savings in retirement, the report said.
Most of the advice emanating from the financial community aims to convince our clients that they should stay the course and continue to give some behemoth control of their money. The premise is that large financial institutions are smarter and better able to make decisions about our client's retirement than our clients can with the help of a trusted advisor.
Hmmm — sort of sounds like the same tune the folks in D.C. are playing.
Annuities are insurance contracts that can offer a steady stream of income for life. High-income households generally don’t need them, according to experts the GAO consulted.
That’s funny. Most annuities are sold to the folks the GAO seems to think “don’t need them.” I wonder where the journalist got her information? Could it have been from a source that qualified as a behemoth?
Middle-income households, defined in the study as having a net worth of about $350,000 including their homes, that don’t have traditional pensions should consider using a portion of their savings to purchase an inflation-adjusted annuity, the study said.
There they go again. You should buy something the behemoth financial institutions — supported by the financial press — want to sell. An annuity may make sense for some and be entirely wrong for others, regardless of their wealth. It's the client and his/her advisor who should decide what products and services to employ to secure adequate inflation protected retirement income that the client can't outlive.
Lower-income families need to accumulate some cash savings first.
Finally, the real truth. However, it’s not just the lower-income folks who need to accumulate savings, it’s all of us. Most of what the Wall Street wonks call investments — everything from 401(k)s, to penny stocks, to well-established mutual funds, to ETFs — are actually gambles and most of what we know about creating wealth is just plain wrong … just ask Benjamin Graham.