As much as you may love the Rolling Stones, you shouldn’t follow their investment advice. Let’s put it clearly: You shouldn’t be relying on annuities to shelter you when you wake up and realize that there’s an old person staring back at you in the mirror. Why’s that? Because annuities are terrible investments that make sense for hardly anyone.
Unless you have an extremely low risk tolerance and you expect to live to 100 years old, annuities are a bad idea – no matter what Mick Jagger tells you. Here’s why.
Annuities: An Attractive Concept…
In theory, annuities are a sensible idea. The Alliance for Lifetime Income – the industry group sponsoring The Rolling Stones’ current tour – makes a decent pitch:
Can’t wait to kick off the @rollingstones #StonesNoFilter tour in just a few hours! Chicago fans, make sure to stop by our truck for a can’t-miss experience before the concert. pic.twitter.com/tDhTn12QZG
— Alliance for Lifetime Income (@alincome) June 21, 2019
They claim that older folks can “retire [their] risk” by buying annuities. In return for a lump sum, the annuity owner gets a stream of dependable income up until they die. Often annuities come with some upside to payments adjusted for inflation, stock market gains, or other metrics. However, should the stock market crater, the annuity will keep paying its guaranteed benefits.
That Fails in Practice
So what’s wrong with annuities? Many things. For one thing, most folks already have a robust annuity: Social Security.
Unless you are an employee of a foreign government or one of the few other groups exempt from Social Security taxes, you’ve already paid into an annuity for decades before you retire.