But selling annuities on retirement money is a great deal for an insurance agent because he or she earns a commission that often amounts to 5% to 7% of your assets. If you think universal life insurance is complicated now, just wait until you see what is being marketed to insurance agents this year from the life insurance companies. Because a self-insuring individual has to be concerned with all possible life expectancies, self-insuring for cash flow typically costs 25-40% more than an income annuity even with the insurance carrier’s costs and expenses factored in, largely on account of the benefits of risk pooling. Indeed, many who didn’t purchase an income annuity and funded cash flow needs out of their portfolios (even those in low cost index funds who funded cash flow at a “conservative” withdrawal rate of 4%), have had to don blue vests and become greeters at WalMart. Moreover, as people near retirement, preserving capital typically becomes more important than growing capital, making a vehicle providing principal protection (like a fixed or fixed index deferred annuity) a good alternative. Bond funds have lower volatilities than stock funds, but they don’t provide principal protection, which is vital to securing the typical retirement plan in the years immediately before and after retirement. read more

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