Is the Annuity Too Good to Be True? - Jill on Money with Jill Schlesinger

Summary

Podcast Summary: "Is the Annuity Too Good to Be True?" – Jill on Money with Jill Schlesinger Release Date: June 27, 2025

In this enlightening episode of "Jill on Money with Jill Schlesinger," host Jill Schlesinger delves into the intricate world of annuities, exploring whether these financial products are genuinely beneficial or merely too good to be true. The episode features a compelling listener call from Steve and Lisa, a retired couple contemplating the advisability of incorporating an annuity into their retirement strategy. Here's a detailed breakdown of the episode's key discussions, insights, and conclusions.

1. Introduction to the Episode

The episode kicks off with Jill Schlesinger and her co-host Mark Talercio setting the stage for a deep dive into annuities. They emphasize the importance of making informed financial decisions and invite listeners to engage via their website, jillonmoney.com, encouraging questions and participation in live discussions.

2. Listener Call: Evaluating the Annuity Proposition

a. Presenting Steve and Lisa's Financial Scenario [05:02 - 11:00]

Steve, 58, and Lisa, 55, are a retired couple who have diligently saved for their retirement. Steve has been retired for five years, while Lisa continues to work, earning approximately $120,000 annually. Their investments are diversified across multiple brokerages, totaling over $4.5 million, which includes IRAs, 401(k)s, company stock, and substantial holdings in E*TRADE.

Key Financials:

Fidelity: $920,000 in IRA rollover, $10,000 in HSA
401(k): $400,000 in Lisa’s account
E*TRADE: $1.7 million
Real Estate: Primary residence valued at ~$750,000 with a $240,000 mortgage at 3.5% interest

Steve and Lisa project needing $100,000 to $120,000 annually over the next seven years to cover expenses, including mortgage payments and a long-term care policy.

b. Financial Planner’s Recommendation: Introducing Annuities [11:00 - 14:15]

Steve explains that their financial planner suggested opening an annuity to create a secure income stream, especially since Steve plans to begin Social Security at age 72. The planner proposed two additions:

Athene Ascent Income Rider (FIA): Funded by rolling over part of Steve's IRA, this would start providing $23,000 annually after five years.
Legacy Income Trust: Intended to offer additional tax relief and benefits.

Steve and Lisa are uncertain about the advisability of these products, prompting them to seek advice on the show.

3. In-Depth Discussion: Are Annuities Necessary? [14:15 - 20:42]

a. Host’s Analysis of the Annuity Proposal [14:15 - 17:49]

Mark Talercio scrutinizes the necessity of the proposed annuities given Steve and Lisa's robust financial portfolio. He argues that with over $4.5 million in assets, creating a stream of income can be efficiently managed without the need for annuities. Mark emphasizes the following points:

Flexibility and Control: Managing withdrawals from existing investments allows for greater control over income streams.
Tax Efficiency: Strategically withdrawing funds can keep them within lower tax brackets, avoiding the hefty taxes that can come with annuities.
Cost Considerations: Annuities often come with fees that can erode returns, especially if the financial situation does not necessitate the security they provide.

Notable Quote:

Mark Talercio [16:45]: "If somebody says, we want to create a stream of income, so create a stream of income. You're a financial planner. You know how to do that."

b. Alternative Strategies Proposed [17:49 - 20:42]

Mark suggests alternative strategies that align better with Steve and Lisa’s financial standing:

Systematic Withdrawals: Implementing a structured withdrawal plan from their diversified investments to generate the required income.
Bond Ladders and Index Funds: Utilizing bond ladders or index funds to manage risk while ensuring a steady income stream.
Minimizing Annuity Reliance: Given their substantial assets, reliance on annuities may be unnecessary, and simpler investment vehicles could suffice.

He reassures Steve and Lisa that annuities are not inherently bad but may not be the right fit for their specific situation. Mark offers to connect them with another financial advisor who can provide a second opinion without pushing annuity products.

Notable Quote:

Mark Talercio [19:02]: "You didn't make a mistake. Everything's fine. I'm so glad you called us because I really do think that this is a lot of people say to me, well, this is a CFP. It's automatic. It's not automatic."

4. Conclusion and Takeaways [20:42 - 22:29]

Mark concludes the discussion by emphasizing the importance of personalized financial planning. He advises listeners to critically evaluate financial products like annuities and consider whether they align with their unique financial situations and goals. The episode underscores that while annuities can be valuable for some, they are not a one-size-fits-all solution and should be approached with careful consideration.

Key Takeaways:

Assess Personal Financial Needs: Before committing to products like annuities, thoroughly evaluate your financial status and future needs.
Seek Multiple Opinions: Consulting with different financial advisors can provide diverse perspectives and prevent potential biases.
Understand Product Mechanics: Gain a clear understanding of how financial products work, including fees, tax implications, and long-term benefits.

Notable Quote:

Mark Talercio [20:41]: "So before you buy any annuity products, please get in touch with us. Let's hear what's going on."

Final Thoughts

This episode of "Jill on Money" serves as a crucial reminder that financial decisions, especially those involving complex products like annuities, should be made with a clear understanding of their necessity and impact on one’s overall financial health. Jill Schlesinger and Mark Talercio provide valuable insights, advocating for personalized financial strategies over generic solutions, ensuring listeners are well-equipped to make informed decisions about their money.

For more personalized advice or to engage with future episodes, visit jillonmoney.com.

Transcript

Jill Schlesinger (0:00)

Do you know a high schooler who's a natural leader who wants to create change by bringing people together? They could be one of the next Student Visionaries of the Year candidates across the country form powerful fundraising teams uniting with the Leukemia and Lymphoma Society to honor a local child with blood cancer. Through this seven week philanthropic leadership program, students build valuable skills like project management, entrepreneurship, and financial literacy. Something I wish I'd learned at that age, but plus, it helps them stand out on college applications. But most importantly, it's a chance for students to connect meaningfully with their communities and make a real impact on blood cancer patients and their families. Learn more about Student Visionaries of the year@lls.org students that's lls.org students hey gang. I was a small business owner.

Mark Talercio (0:51)

I know how hard it is.

Jill Schlesinger (0:52)

And starting your business should actually be simple. Now you can get more. When you start your business with Northwest Registered Agent, your entire business Identity in just 10 clicks and 10 minutes. Northwest registered agent provides more privacy, more guidance, and more freedom to run your business from anywhere. If you want to build your business while keeping your personal information secure, Northwest is the partner you need. In just 10 clicks and 10 minutes, they'll form your business. Create a custom website and set up your local presence wherever you need it. Don't wait. Protect your privacy, build your brand and set up your business in just 10 clicks. In 10 minutes. Visit northwestregisteredagent.com Jill and start building something amazing. Get more with Northwest registered agent@northwestregisteredagent.com Jill.

Mark Talercio (1:53)

Welcome to the Jill on Money Show. It's Friday, June 27th, but let me pause for a second. It is not Friday, June 27th for us. Recording it is Monday. And it is Monday, the beginning of a heat wave and Mark and I are already cranky. It's really been a day. And so for everyone who is suffering under the heat, please don't stay outside too long. Please keep your pets inside. Don't be a hero and turn up that ac. You don't have to go crazy, but you know, be smart and be careful, okay? That's my general interest, kind of. Hey, here's your warning.

Theo (2:28)

Can somebody in New York City go get Theo for me today? Picking up from school.

Mark Talercio (2:32)

Is anybody on the Lower east side who can go get Theo, just let us know. You know, message Mark. Anyway, this is the program that takes the mystery out of your financial life. And we do that by encouraging you to go to our website, jillonmoney.com when you're there you'll see in the upper right hand corner there is a contact us button. And when you actually click that button, a form will pop up. And that form is really the email that we receive. So complete the form, give us a lot of detail if you do not want to come on the program. And if you'd like to join us, just check the box, Mark. We'll do everything else. Also on the website you will see a little streaming thing that goes across the top. It says, donate to Jill's cycle for the cause. Donate. Okay, so this is this crazy 275 mile, three day event that I do to raise money for HIV and AIDS. It's the Boston to New York ride. And so I am very grateful for those folks who are already been. They've been great, Mark. They already started donating. And FYI, when you donate, even if you don't, I am seeking some feedback in terms of I need music. Okay, so I got a couple that were great. Rich wrote somebody Told Me by the Killers. So that was good. I didn't have that on my list. And then I got another one, Mark, that was from Sarah who said new.

Summary

Podcast Summary: "Is the Annuity Too Good to Be True?" – Jill on Money with Jill Schlesinger Release Date: June 27, 2025

1. Introduction to the Episode

2. Listener Call: Evaluating the Annuity Proposition

a. Presenting Steve and Lisa's Financial Scenario [05:02 - 11:00]

Key Financials:

Fidelity: $920,000 in IRA rollover, $10,000 in HSA
401(k): $400,000 in Lisa’s account
E*TRADE: $1.7 million
Real Estate: Primary residence valued at ~$750,000 with a $240,000 mortgage at 3.5% interest

Steve and Lisa project needing $100,000 to $120,000 annually over the next seven years to cover expenses, including mortgage payments and a long-term care policy.

b. Financial Planner’s Recommendation: Introducing Annuities [11:00 - 14:15]

Athene Ascent Income Rider (FIA): Funded by rolling over part of Steve's IRA, this would start providing $23,000 annually after five years.
Legacy Income Trust: Intended to offer additional tax relief and benefits.

Steve and Lisa are uncertain about the advisability of these products, prompting them to seek advice on the show.

3. In-Depth Discussion: Are Annuities Necessary? [14:15 - 20:42]

a. Host’s Analysis of the Annuity Proposal [14:15 - 17:49]

Flexibility and Control: Managing withdrawals from existing investments allows for greater control over income streams.
Tax Efficiency: Strategically withdrawing funds can keep them within lower tax brackets, avoiding the hefty taxes that can come with annuities.
Cost Considerations: Annuities often come with fees that can erode returns, especially if the financial situation does not necessitate the security they provide.

Notable Quote:

Mark Talercio [16:45]: "If somebody says, we want to create a stream of income, so create a stream of income. You're a financial planner. You know how to do that."

b. Alternative Strategies Proposed [17:49 - 20:42]

Mark suggests alternative strategies that align better with Steve and Lisa’s financial standing:

Systematic Withdrawals: Implementing a structured withdrawal plan from their diversified investments to generate the required income.
Bond Ladders and Index Funds: Utilizing bond ladders or index funds to manage risk while ensuring a steady income stream.
Minimizing Annuity Reliance: Given their substantial assets, reliance on annuities may be unnecessary, and simpler investment vehicles could suffice.

Notable Quote:

Mark Talercio [19:02]: "You didn't make a mistake. Everything's fine. I'm so glad you called us because I really do think that this is a lot of people say to me, well, this is a CFP. It's automatic. It's not automatic."

4. Conclusion and Takeaways [20:42 - 22:29]

Key Takeaways:

Assess Personal Financial Needs: Before committing to products like annuities, thoroughly evaluate your financial status and future needs.
Seek Multiple Opinions: Consulting with different financial advisors can provide diverse perspectives and prevent potential biases.
Understand Product Mechanics: Gain a clear understanding of how financial products work, including fees, tax implications, and long-term benefits.

Notable Quote:

Mark Talercio [20:41]: "So before you buy any annuity products, please get in touch with us. Let's hear what's going on."

Final Thoughts

For more personalized advice or to engage with future episodes, visit jillonmoney.com.