Scott Witt is principal of Witt Actuarial Services, one of a rare breed of fee-only insurance advisors who provide fiduciary advice to clients on products such as annuities and is paid on an hourly fee basis rather than through sales commissions. In this relatively brief (14:44) podcast interview, Scott argues that the biggest investor roadblock in assessing these unloved products is viewing them as investments rather than as a form of insurance against outliving one’s wealth.
He explains the benefits include not just monthly income, but also the security to give to charity, gift to children, travel and invest more aggressively with the balance of one's portfolio.
Scott says your health is the first condition in assessing whether to acquire an income annuity. The insurance companies know that most purchasers have an optimistic view of their longevity and price accordingly. Potential buyers should next decide whether the insurance is to cover just oneself or the last to die of the couple, and whether income should remain at the same or a diminished level for the survivor. Next on the flowchart are decisions as to whether an annuity buyer wants pure insurance or the possibility of a partial refund.
Scott explains why some conflicted advisors, far from wanting to put you into an annuity, may want to discourage you from doing so. He warns that getting the cheapest annuity counts for less than getting the decision right on whether to get one in the first place and then choosing the best options on the contract. And he offers a glimpse into how he conducts his own client engagements.