47 0 0 0 13 6. Or is this unwarranted should i invest in an annuity that could push you into an investment you may not need?
I’ve long recommended that people in or nearing retirement should consider devoting some, but not all, of their savings to an annuity as part of their retirement income plan. Annuities aren’t for everyone, and certain ones can be mind-numblingly complex and laden with onerous fees. Research also shows that people who have annuity or pension income tend to be happier in retirement and are more likely to report that their standard of living improved after they retired. Retire With Money Sign up to receive key retirement news and advice. Mark White, author of The Manipulation of Choice: Ethics and Libertarian Paternalism. Indeed, even if annuitizing a portion of savings is a fine choice for many, or even most, people, it may not make sense for many others for a number of reasons. For example, a person may already have all the guaranteed income he needs from Social Security and a pension or want to leave a legacy or have health problems that could shorten life expectancy—or he may simply prefer to mange his entire nest egg on his own.
Of course, there is the opportunity to opt out of the default. But the effectiveness of that escape hatch depends a lot on how the default is structured. The less attention that’s called to the default or to your right to override it, the more people are likely to end up with the default option, even if it’s not the right choice for them. Which is why Sass believes that in the case of annuitization—a decision that can be pretty complex and that’s typically irreversible to boot—any default should come with some sort of education. There has to be some acknowledgment that they understand. Still, even a default that’s explained and discussed can be plenty persuasive. And one can argue that the good these defaults do in getting people to save for retirement outweighs the fact that they achieve that end through subtle manipulation.
But it seems to me that a decision as momentous as putting a chunk of your life savings into an annuity—an investment that can be difficult to understand and that may be impossible to get out of—is one that you should fully understand and be actively engaged in. And you should make the move only if you believe it’s in your best interests, not because someone else does. Regardless of whether this proposal becomes a reality, the issues surrounding defaults and nudges are still relevant when it comes to retirement income and annuities. The reason is that people generally don’t just decide out of the blue to buy an annuity. More often, they’re nudged—in some cases, pushed may be a better word—into doing so by an adviser who stands to gain by selling the annuity. But that doesn’t necessarily mean it’s the right choice for you. Money may receive compensation for some links to products and services on this website.
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