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Know your annuity Update May 24 2026
Is there money in annuities?
Years ago, on more than a few Money Matters radio shows, I covered annuities with a bit of disdain and with good reason. In my opinion, the annuity universe was like the wild west, and frankly, I was no fan.
Back then, I found them confusing and as a financial analyst and stock market participant for decades, I never advocate putting money into anything confusing.
I have always said, “Your money should be regarded like your child. Always know where they are and what they’re doing, or some not-so-good things may occur.
Kind of an odd comparison and knowing where your money is might not be as important as knowing where your children are, but damn near.
As a financial analyst, I believed back then, and still do, knowing at least something about what one is invested in is wise advice.
I used to attend sales presentations from annuity companies and would sit in these meetings looking at all the different strategies offered and frankly scratch my head at almost all of them.
I don’t know. Maybe it was me, but most were so complicated as to how they worked, I would throw my hands up and walk out thinking if I, not a complete neanderthal about all things money, couldn’t understand how these investments worked, there was no way I would recommend one.
Graduating way back in 1979 with a degree in economics with honors and having been investing in the market since literally age 13 (with the help of my dad), I know a thing or two about financial matters. Complicated investments are just not for me nor anyone I might advise.
Fast forward to today, and although many annuities I still find way too complicated, I have found a handful that fulfills some niches and are simple enough for even the novice investor to understand.
Some triggered annuities can be easy to understand as well as what I call participation annuities. Triggered annuities may promise a fixed rate of return if the underlying index moves up but may offer a no-downside protection feature. Participation annuities center around offering a split of some percentage of a stock market increase, but like a triggered annuity, may have a no-downside clause.
I view these types of annuities as simple to explain with paper and pen. My father used to tell me that visually illustrating something can cut right through to someone’s conceptualization of whatever it is you are trying to explain. Drawing it out on paper while explaining the terms and conditions usually provides an investor with a clearer understanding of how the investment works.
Investors often say they want to make some money but not lose any. Although it sounds silly, it’s a valid petition to offer up such a desire.
After all, a bank savings account or CD offers such a feature. You won’t lose any money, but being FDIC insured and all, the investor will still make some money, right?
An annuity might have such a feature but may offer a better return than the current bank rate, which is why someone might invest in an annuity.
The bottom line is that annuities may have had a bad name at some point and no doubt; there are many annuities I still wouldn’t touch with the proverbial ten-foot pole.
But for investors who just can’t stomach any losses whatsoever, and there are many of them, a well-structured annuity with a simple strategy that almost anyone can understand might be just the right fit.
Keep in mind, annuities are not FDIC insured, and investors should read the prospectus in its entirety. That said, most advisors can and should sit down with anyone interested in an annuity and explain in full detail all the features, benefits and conditions that an annuity may have.
I will conclude today’s musing by saying if you don’t understand completely what is being presented, ask more questions. When in doubt, seek out a second opinion from a tax professional or perhaps even another advisor. And before making any annuity investment, although some insurance agents are allowed to sell annuities, in my opinion, also run it by an advisor at a reputable firm.
This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, or a recommendation to buy or sell any securities, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a B.A. in Economics with honors, 1979, and California Insurance License #0L34249 His insurance agency is BAP INC. insurance services. Email: news@moneymanagementradio.com.
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