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Using Annuities to Weather the Storm


In “How to Walk Through Fire,” Kerry Pechter of Retirement Income Journal highlights three financial advisors working in a traditionally unconventional way to secure their clients’ retirement future.  All three advisors are in the western United States.  They have built retirement floor income to protect their clients from a tumultuous market, allowing these clients to avoid the worry plaguing many in this volatile economy.  Phil Lubinski of Denver uses what is known as a “bucket approach” to secure guaranteed money for the first years of retirement.  He uses six of these buckets, each of which grows in risk as the time they will use the money is farther away.  For example, a 401k annuity (transferring your 401k to an annuity) would be the least risky and could fill the first bucket of retirement.  His philosophy is that guaranteed income is the most important for the first five years of retirement.  The sixth bucket would start with the least amount of money and the highest risk profile since there is a large time frame to hopefully grow the balance.

In Kansas, Dean Barber uses a similar philosophy with the clients that he labels “the millionaire next door.”  His first priority is protecting their assets; growing the money is second fiddle.  Barber specializes in clients who are very near retirement or have already retired and finds that this approach works best to keep them financially secure in retirement.  All of his clients defer their Social Security payments until age 70 and use other retirement funds, such as annuities, to fill the space between retirement and receipt of Social Security.  Larry Frank of California uses his extensive research to change the risk level of clients’ portfolios before any negative market effects can occur.  Clients over the age of 55 have significantly less risk not only because they are closer to retirement, but because they have a higher risk of job loss or medical problems.  In all three examples, being covered by the guaranteed income and low risk of annuities included in your portfolio helps secure a worry-free retirement in a volatile climate.

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