Should you use a single premium immediate annuity to "buy a pension" income?

There was an excellent article in the weekend edition of the Wall Street Journal, authored by Matthias Rieker an entitled " Pros and Cons of "Buying a Pension".  You can link to it here but it might be stuck behind the pay wall, so dig around if you can and get a copy. 

Essentially it is a mirror discussion of the issues many of us in the structured settlement profession deal with every day, which is questions as to whether or not the trade off for a safe, secure and fixed rate check is worth the risk that it might erode over time when impacted by inflation. The fact that these single premium immediate annuities are rising in popularity is not surprising to those of us in the structured settlement profession, but it always seems to stun the investment advisory world who hates losing control of assets under management upon which they can charge a substantial fee each year. 

The reality is for those of us who have been in the business of providing guaranteed income to people who DEPEND on regular income and no longer have employment options due to retirement, illness, disability or injury, the value of guaranteed income for life is a huge planning tool and benefit that works for the vast majority of claimants who rationally look at their options. Covering your reasonable monthly expenses and bills with a fixed income is exceptionally prudent, with the balance of your assets invested for growth so as to hedge against inflation and provide for unforeseen or additional expenses as time goes on. I can't tell you the number of people I've seen dissipate lump sums in a short period of time, when a fixed life time income could have saved them from financial issues down the road. 

Take the time to read this, it's a nice collection of facts and ideas and start to question those who make money from managing your assets over long periods of time and charge you a percentage of assets fee while doing so. 

Posted on December 6, 2014 .