Is There an Alternative to Annuities?

Summary

Podcast Summary: "Is There an Alternative to Annuities?"

Podcast: Jill on Money with Jill Schlesinger
Host: Jill Schlesinger, CFP®
Episode Release Date: July 28, 2025

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Introduction

In this episode of Jill on Money with Jill Schlesinger, host Jill Schlesinger delves into the topic of retirement planning with a focus on exploring alternatives to traditional annuities. The episode features a listener call-in from Gary, a 62-year-old nearing retirement, seeking advice on his financial plan presented by his financial advisor.

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Listener Call-In: Gary’s Retirement Plan

Timestamp: [01:07]

Gary reaches out to the show expressing his desire to retire imminently, sharing that he feels physically and mentally exhausted from his current work life. He mentions having worked with a financial advisor since May, who has formulated a retirement plan he’s seeking validation for.

Gary:
"I would like to retire in a month. I just finally had enough."
[01:07]

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Breakdown of Gary’s Financial Situation

Timestamp: [03:22] - [07:22]

Jill engages Gary in a detailed discussion to understand his financial landscape:

• Age & Workforce Status:
  Gary is 62 and wishes to retire within a month, while his wife is 57 and plans to continue working.
  "You’d like to say I want to retire in a month."
  [03:22]

• Income & Expenses:
  Gary and his wife aim to cover their monthly expenses of approximately $6,000. His wife’s annual salary is near $60,000, contributing significantly to their household income.
  "About six grand a month."
  [04:18]

• Housing:
  They own a home valued between $800,000 to $840,000 with existing mortgages of $460,000 at 3.2% and $60,000 at a similar rate.
  "We have a first which is 460, and we have a second which is like 60."
  [05:23]

• Retirement Savings:
  Gary has $37,000 in a DCP plan and $340,000 in a 403(b). His wife holds $56,000 in her own 403(b). Additionally, Gary is entitled to a pension of roughly $1,800 monthly. They also have $7,000 in savings.
  "He has a fidelity 403B through her work, which has like 56,000 in there."
  [07:54]

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Analysis of Gary’s Financial Advisor’s Plan

Timestamp: [08:21] - [12:19]

Gary explains that his financial advisor has proposed a plan that organizes their funds into various "buckets" spanning different time frames (1, 3, 5, 7, 10, and 20 years). This includes investments in annuities and insurance products designed to protect principal while earning interest.

Gary:
"They split up our money into these buckets... one of them will be annuity, the other, some of the insurance products."
[08:21]

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Host’s Concerns and Recommendations

Timestamp: [09:09] - [12:19]

Jill expresses reservations about the advisor’s strategy, particularly the emphasis on annuities and structured products. She highlights potential drawbacks:

• Liquidity Issues:
  Jill is concerned that tying up a significant portion of their savings in annuities could limit access to funds in case of unforeseen expenses.
  "I am more inclined to have this money available to you and then maybe see what happens after you sell the house and you move abroad."
  [11:13]

• Product Dependence:
  She points out that the advisor's approach seems heavily product-focused, which may not be necessary given Gary and his wife's financial standing.
  "They tend to be very product heavy. They lean on the sale of products."
  [10:50]

• Recommendation for a Second Opinion:
  Jill advises Gary to consult another certified financial planner to evaluate the proposed plan independently.
  "I would get a second opinion from someone who's a certified financial planner and say, what do you think of this plan?"
  [11:56]

• Exploring Alternatives:
  Emphasizing the importance of flexibility, Jill suggests exploring plans that offer easier access to funds without committing to fixed insurance products.
  "What are the alternatives? That's the question that you can ask."
  [11:40]

Gary mentions that the proposed plan includes access to funds through protected plans and has earmarked a $45,000 emergency fund. However, Jill remains cautious, reiterating the value of maintaining liquidity and flexibility, especially considering their plans to move abroad.

Gary:
"There will be access to the funds from these protected plans and they set aside emergency cash fund of 45,000 out of that."
[12:19]

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Conclusion and Final Advice

Timestamp: [12:19] - [16:13]

Jill summarizes her stance by reinforcing the importance of not locking funds into products that may not align with Gary and his wife's evolving needs. She encourages seeking multiple opinions to ensure the chosen financial plan truly serves their best interests.

Jill Schlesinger:
"If you are being pitched something like this, get in touch with us... Subscribe to us on the Odyssey app... Please leave us a rating and review wherever you listen."
[12:19]

She wraps up by inviting listeners facing similar financial dilemmas to reach out for guidance, emphasizing the show's mission to provide clear, jargon-free financial advice.

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Key Takeaways

1. Evaluate Product Dependence:
   Be cautious of financial plans heavily reliant on insurance products like annuities, especially if they limit access to your funds.

2. Seek Multiple Opinions:
   Consulting with more than one financial advisor can provide a well-rounded perspective and ensure that your retirement plan is robust and flexible.

3. Prioritize Liquidity:
   Maintaining accessible funds is crucial for unexpected expenses and adapting to life changes, such as relocating abroad.

4. Understand Your Needs:
   Tailor your retirement strategy to fit your unique financial situation, goals, and comfort with investment products.

---

Notable Quotes:

• Gary on Retirement Decision:
  "I would like to retire in a month. I just finally had enough."
  [01:07]

• Jill on Seeking Alternatives:
  "What are the alternatives? That's the question that you can ask."
  [11:40]

• Jill on Second Opinions:
  "I would get a second opinion from someone who's a certified financial planner and say, what do you think of this plan?"
  [11:56]

• Jill’s Final Advice:
  "So if you are being pitched something like this, get in touch with us."
  [12:19]

---

For more detailed discussions and personalized financial advice, listeners are encouraged to visit jillonmoney.com and connect with Jill Schlesinger.

Transcript

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[Jill Schlesinger]

Welcome to the Jill on Money show. It's Monday, July 28th. Oh my gosh. We're really getting down to it. July almost behind us. The year is whizzing by. Maybe you're out in your summer frolic and you're enjoying weather that is like a little bit putting you into that good mood and you're saying to yourself, you, you know, I really have a question about blank. Sometimes I feel like the seasons can give us a little space to consider something different. Maybe you are looking at what lies ahead for you and you want to know what are the possibilities. If that sounds familiar, if that's maybe conjuring something cool for you. What I would suggest is going to our website, jillonmoney.com if you in the upper right hand corner, click the contact us button, write us a note. And if you'd like to join us live, you can check the box. Mark will do everything else after that. And you know, for some of you who are a little tech phobic, I know it can be tough. But Mark and your friends in life will help you out. That is what Gary found. Gary joins us from the Pacific Northwest. And Gary, you get an award. You get five stars for sticking with us, man. And I know we had a hard time getting you on the air last week and here we are are today. So how are you? And thank you so much for your patience with us.

[Gary]

Oh, we're good. I, I just appreciate Mark's patience with.

[Jill Schlesinger]

Oh, he's the Best, isn't he? Yeah, he's great. What's going on? How can we help you out?

[Gary]

I would like to retire in a month. I just finally had enough.

[Jill Schlesinger]

And what made you. Wait a second. What was the enough? Like, what was it? Was there a moment in time where you just, like, I am exhausted. Like, what was it for you?

[Gary]

Physically and mentally worn out, and I don't feel like I can keep going. So my question is, I found a financial advisor and I've been working with them since May, and they put a plan together. I just wanted to run by you and see if it's. Sounds kosher.

[Jill Schlesinger]

Okay. I like it. I love. I like the idea that, like, you're already out, you're done. So how old are you, Gary?

[Gary]

Well, I'm not done yet, But I, I'm 62.

[Jill Schlesinger]

And you'd like to say I want to retire in a month. So you're, you're, like, you've done, you've put up with enough. Let's see if we can make this happen. What does the advisor say? Did they do a plan that showed you could do it?

[Gary]

Yeah, they asked me, you know, what our monthly budget is, and, and I told them, and yeah, I think it's doable. My wife will still be working.

[Jill Schlesinger]

Oh, that makes it a lot easier. How much does she make right now?

[Gary]

Closer to 60.

[Jill Schlesinger]

Can you live on her salary alone, do you think, or not?

[Gary]

No. No.

[Jill Schlesinger]

Okay. How old is she?

[Gary]

She's 57.

[Jill Schlesinger]

How much money do you think you need? When you look at your expenses, like, what do you think you need to live on? What's the spend that you need?

[Gary]

About six.

[Jill Schlesinger]

Six grand a month. Okay, I gotcha. And she has five. Well, it's not five grand, because I'm sure she. There are things that come out of that. Will you continue? So would you receive health insurance on her plan? Is that the game plan for you guys?

[Gary]

Yes.

[Jill Schlesinger]

Okay, so she would carry you on her health insurance. So that's good. She would, you know, obviously create a bunch of the money that you need for. For the expenses that. To cover those expenses. How long do you think she would like to work?

[Gary]

Well, so the plan, we've decided to, to move in in a few years, and that's one of the reasons why I wanted to retire so I could start planning out and getting the house ready for. To put on the market and all that.

[Jill Schlesinger]

Okay. Okay. How much is the house worth?

[Gary]

800 to 840.

[Jill Schlesinger]

All right. Is there a mortgage that remains?

[Gary]

Oh, yeah.

[Jill Schlesinger]

Oh, yeah. How Much is the mortgage was left. What's left?

[Gary]

So we have a first which is 460, and we have a second which is like 60.

[Jill Schlesinger]

What's the interest rate on the 460?

[Gary]

We got a pretty low. It's 3.2.

[Jill Schlesinger]

Good. And what about the 60? That's probably variable. Is that right?

[Gary]

No, it's fixed. It's also low. It's like around three.

[Jill Schlesinger]

Oh, my God. For a second. That's amazing. But where. Moving always sounds like a great idea. Are you thinking about moving to someplace like, much cheaper? What do you think?

[Gary]

Well, we're thinking moving abroad.

[Jill Schlesinger]

Oh, okay. And would it be more or less expensive, do you think?

[Gary]

You know, we just kind of started this process, but it. It would be much cheaper.

[Jill Schlesinger]

Much cheaper.

[Gary]

So, yeah, probably like half. Half of what our monthly expenses are right now, really?

[Jill Schlesinger]

Okay, but would you buy or would you rent someplace?

[Gary]

In the beginning, we would rant and.

[Jill Schlesinger]

See how you like it. Right. Do you guys have kids? Grown kids? What's going on?

[Gary]

We have two grown kids. Yeah. One is 24 and the other one is 30.

[Jill Schlesinger]

Are they okay and on their own?

[Gary]

Yes, they're. They're on their own. One of them needs a little help.

[Jill Schlesinger]

A little. But not. Not like some major amount of ongoing support, right? No.

[Gary]

No.

[Jill Schlesinger]

Okay. What have you guys, besides the house where you have a nice big chunk of equity, what have you guys saved to make this happen? Like, you have a. You have a retirement plan at work right now. How much money is in there?

[Gary]

So there is a dcp plan, which I have 37,000. Then there is a purse three plan, which I have 340,000.

[Jill Schlesinger]

Mm. Okay. So you'll be entitled to a pension, Is that right?

[Gary]

Yes.

[Jill Schlesinger]

What will that pension amount be?

[Gary]

Around 1800.

[Jill Schlesinger]

So that's pretty good, though. If your wife's going to keep working for a few years and she is making 60 grand, and then you've got 1,800amonth from your pension. Her income plus that pension should not exactly, but pretty close to cover your needs, Right. Your expenses. So that's good. And then you've got this other pot of money. Does she also have a retirement account?

[Gary]

Yeah, she has a fidelity 403B through her work, which has like 56,000 in there.

[Jill Schlesinger]

What's the actual issue that you are are inquiring about? You hire this financial person, they do a plan. What is the plan? What is the recommendation of the plan that I think you're seeking a blessing of? What. What do they say they want to do?

[Gary]

So they want to pull all the money together and they made this plan which is. Has different buckets in it, like one year, three year, five years, seven year 10 and 20, I believe. And so they, they split up our money into these buckets.

[Jill Schlesinger]

And I'm going to guess they would think. They think you should buy an annuity.

[Gary]

Well, I think one of them, yeah, one of them will be annuity, the other, some of the insurance products. And so the plan, 1, 2, 3, 4, 5, it has a protected principal. These are protected principal accounts. And so you earn interest on it, but you're. Yeah, obviously your principal is protected.

[Jill Schlesinger]

I am concerned that if you took all of this advice and put it to work, that you're tying up a lot of your money. I know that they have the 1, 3, 5 and everything, but all these things cost money. And I think that this might be over, overkill for what your needs are. Because it sounds to me, it's so funny. Like, the basic facts seem like they line up okay, meaning your wife works for a few more years. You. You got that pension. That money is the money you'll need to live on. You have a. Do you have any money in savings besides the retirement accounts that you and your wife maintain? Is there, Is there a bank or a savings account that you have?

[Gary]

Yeah, we have about 7,000 in savings.

[Jill Schlesinger]

That's it.

[Gary]

Yeah.

[Jill Schlesinger]

So I'm a little concerned that if you tie up all this money, we lose access to it and you may need this money to do different things. I don't know if I want there to be an annuity. I am more inclined to have this money available to you and then maybe see what happens after you sell the house and you move abroad. But I think you're going to want to have access to your money. I'm not saying this person's trying to screw you. I'm just saying that what I would be more interested in finding out is, okay, that's one plan. What would a plan look like if we just actually did not have in these. We didn't have these products, we didn't have a protected principal account, but we had some money that was in a retirement account that we manage or you manage and it's accessible to us? We're a little uncomfortable tying up our money because we kind of don't know where life is going to lead us. And especially with this move abroad. And I would seek another alternative. And I know that may sound like kind of a pain in the butt, but I think it's important that people look forward Especially because you're so. You guys are both so young. She's 57, you're 62. You don't know what's going to happen. You don't know how life's going to roll. You might need $50,000, and if it's sitting in some sort of structured account, then I don't think that that's going to serve you well. So I think what I would do is I would be very careful about moving forward with them. I don't want to make you. Again, I'm not going to tell you that this person is necessarily ripping you off or they're this, that and the other thing. I might get a second opinion. I might go to someone who's a certified financial planner and say, what do you think of this plan? And see what they say. I think that you guys need to be a little bit more careful about tying up your money. I know that there are a lot of advisors, people with radio shows, people who deal with people who have state pensions, people who deal with teachers or these hospitals. They tend to be very product heavy. They lean on the sale of products. And I would just be a little bit cautious. Before I dropped, I. I dumped the money into those products. Does that make sense to you, Gary?

[Gary]

It does, but I have to mention that there will be access to the funds from these protected plans and they set aside emergency cash fund of 45,000 out of that.

[Jill Schlesinger]

And so, yeah, okay, as long as there's some access. I still would say to them, what if I didn't want to do this? I don't want to sink 200 grand into this. What's my alternative? Ask that question. That is the question to ask. Because without the answer to that question, I do feel like they're pushing this product and I am concerned that that is good for them and may not be so good for you. I would get a second opinion. That's what all I'm going to tell you. And I think that you sound like you're in a good place place generally. But I would get a second opinion from someone not involved in this company at all. That's what I would do. And if you think that that's, you know, when I see things that are structured and products and annuities, that is a bit of an A. That's a warning to me. Okay? That's a warning. It doesn't mean it's the worst thing in the world. But not every single problem needs a solution that's called an insurance product. So in my mind, even though there May be some money that's liquid. I just would like to have someone else's eyes on the situation. And I know that you are. I know you want to believe that everything's on the up and up. Maybe it is. But it's like a doctor. You want to get a second opinion. And so that's my advice to you, that it sounds good, but we want some confirmation. Okay? And if you can get some confirmation and someone else says, yeah, that's a cool plan, fine, but I wouldn't go through with it right away until I had some more confirmation. And so I hope that helps. I know that it's probably not exactly the answer you want because everybody likes to think that whoever they're dealing with is doing the right by them. But a second pair of eyes on a situation. And again, I'm not looking at these products. I am not looking at how much they cost. Because sometimes people will say, like, oh, well, you know, we don't make any money managing your money unless you want us to. And then there's all of a sudden they're getting paid a commission or some sort, something from our product. Let's get another set of eyes and ears on it. You can go to letsmakeaplan.org which is a CFP website. That's what I would do. So if you're listening to this and you're engaging with an advisor, you're engaging with somebody who is putting a proposal in front of you, the question to ask is, what are the alternatives? Every advisor knows there's more than one way to get to the end result. What are the alternatives? That's the question that you can ask. And if you can do that, I think that it would serve you a lot better than just proceeding as if everyone is the best actor in the world. Maybe these folks are great, maybe not. So I hope that helps. And again, if you are being pitched something like this, get in touch with us. Go to jillonmoney.com upper right hand corner, contact Us button. Write us a note, let us know if you'd be willing to come on the air. And, you know, just give us a lot of detail. If you don't want to come on the air, that's very important as well. So give us a shout. Jillonmoney.com okay, you can subscribe. Subscribe to us on the Odyssey app or wherever you find your favorite podcast. Please leave us a rating and review wherever you listen and of course, do something nice for someone else today. Change your work, change your wealth, change your life. Thank you for listening. We'll talk to you tomorrow.

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[Brian]

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