By Bill Broich
Often, we hear about annuities and how many fees are “hidden” within them. So why would anyone consider an annuity? Annuities come in 2different sizes, those sold by stock brokers (variable annuity) and those sold by insurance agents (fixed annuities).
Annuities sold by stock brokers are security products, annuities sold by insurance agents are insurance products. So how is an annuity different than an egg?
How many times have you heard that an annuity is a rip-off? I have been told that many times and yet when I explain the difference between annuities, people seem to warm up to our side, insurance.
If I were in the market for an egg, would I not want to buy the best one? Not so fast, eggs are different also. It is all about the label, just like annuities. Nothing is ever as simple as it seems.
Choosing an egg can expose you to a wide variety of choices, is not an egg always an egg? Yes, like annuities, an egg is an egg but the difference is in the wrapper. For those looking to buy eggs from humanely raised chickens, you have a variety of terms to navigate. In the United States, more than 90% of eggs come from caged chickens eating a corn or soy diet and have only 67-square-inches to move. They also never go outside.
If you want to purchase eggs from chickens raised in more natural surroundings, follow this guide to make sure you understand what the different marketing terms mean.
• Cage-Free: This environment removes the cages and is a step up from the most factory-based approaches. However, the chickens still live strictly indoors in confined, group spaces with less than 1 square foot of room. They eat a corn or soy diet.
• Free-Range: Chickens raised in this manner need 2 square feet of room per hen. Surprisingly, they often get to spend less time outside than you might expect. Many hens still eat a corn or soy diet.
• Pasture-Raised: These chickens are the ones who get the most access to the outdoors, often put outside in the morning and brought back in at night. They must have at least 108 square feet of space each and can eat anything they find in the dirt, such as grass, bugs, and worms.
Just like eggs, annuities have many different moving parts that can offer benefits. Fixed annuities offer guarantees, no fees and full avoidance of market risk. But, their returns might not be as high as their security cousins.
Variable annuities have lots of fees, market downside but a possible higher market upside.
How do you know which to choose, think of it this way: Annuities should be for your safe, secure and guaranteed funds. There is never any market risk with fixed annuities.
If you want a higher possible return and can afford some level of risk, buy an appropriate investment such as mutual funds, stocks and or bonds. Avoid the fees and expenses, avoid variable annuities.
Also, don’t pasture raised chickens sound better?