Submitted by Anonymous on
It is my opinion that annuities are not everyone, but there are those with a certain amount of assets that can benefit significantly by using annuities. Others, it seems, with greater wealth may not need an annuity. In fact, it could be wasteful.
What are your thoughts on this?
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tom replied on Permalink
Too Rich for Annuities
It is true that a certain level of net worth will make it difficult for an annuity to add any value.
A person with $10 million net worth at age 65 more than likely has no use whatsoever for an annuity. Assuming prudent management of their assets, the high net worth person can generate sustainable income from their own assets and can essentially self-insure longevity risk.
Annuities are complex and come in many different flavors, but at their essential value comes in the form of guaranteed income and protection against longevity risk.
There is an involved financial planning exercise that must take place in order to determine how an annuity fits in a person's financial profile. Again, though, the annuity will likely be used to create a source of stable income and protect against outliving assets.