The Rolling Stones are no strangers to controversy. Since the band’s creation in 1962, the Stones have wrecked hotel rooms, dressed in drag, and consumed enough narcotics to incapacitate several elephant herds. The band’s 2019 No Filter tour is no exception. The headlines are less racy now that Mick Jagger and Keith Richards are well into their seventies, but the Stones’ decision to accept the Alliance for Lifetime Income as the tour’s sole sponsor has raised plenty of journalistic eyebrows. After all, it’s a little disconcerting to see the band that once headlined at the infamous Altamont free concert repping retirement plans.
However, while the tour props might border on the surreal (think: red plastic statuettes of the suggestive Hot Lips logo with “Retire Your Risk” printed on the tongue), the sponsorship arrangement makes sense. The Alliance for Lifetime Income is a non-profit trade alliance made up of the nation’s largest financial service companies. The organization’s goal is to educate consumers about annuities and retirement income by promoting their Retirement Income Security Evaluation score, which measures how well an individual’s current savings will support them in retirement.
The Rolling Stones fanbase is made up of adults between the ages of 45 and 75 with $75,000-$2 million in investable assets— the demographic most likely to benefit from including an annuity in their retirement plan. In a February interview with Investment News, the Alliance’s Executive Director Jean Statler discussed the arrangement: “We are certainly looking for some nontraditional way to get in front of this audience…What we have with the Rolling Stones is the opportunity to break through and generate that awareness with a huge group of Americans.”
Not everyone is so excited about the Rolling Stones’ new sponsors, however.In a recent Forbes article, James Lange of Lange Financial Group LLC, accused Mick Jagger and company of attempting to turn a profit “trying to sell the most vulnerable of us high-cost, high commission commercial annuities.” To hear Lange tell it, the Stones may as well be playing on cheerfully while Wall Street’s own Hell’s Angels beat down on their aging fans. In response, Charles DiVencenzo, Jr., President of the National Association for Fixed Annuities (NAFA), wrote a letter to the editor of Forbes Magazine defending the Stones/Alliance partnership and suggesting that Mr. Lange had built a strawman argument in order to misinform readers and “push his own biased investment platform.”
What, exactly, is the average person supposed to make of all this? Are annuities genuinely helpful products or are the Rolling Stones and their new tour sponsors asking us to show sympathy for the devil?
What is an annuity?
The question “what is an annuity” is a little like asking “what is a dog” in that all dogs share a few core traits (four legs, tails, an unbridled love of tennis balls) with massive deviation—consider, for example, the differences between a Pekingese and a Pitbull.
In general, an annuity is a contract with an insurance company where the contract owner, in return for giving the company a lump-sum payment or a series of payments, receives an annual income while the remaining funds grow on a tax-deferred basis. The shared characteristics end there. Some annuities pay out immediately; some defer disbursements until a later date; some accrue interest at a predetermined rate; some offer growth tied to the stock market. Some annuities will gnaw your arm off with high fees while others can sit, stay, roll over, and fetch excellent returns on your investment with little overhead.
Some people benefit from having an annuity, while others do not. Additionally, among people who can benefit from annuities, it is important to choose an annuity that fits your specific needs. After all, if I need a guard dog, I should invest in a Doberman, not a Pomeranian. I should also make sure that the specific contract is a good deal for me; is the contract, and the insurance company that issues it, in good health? Will it eat my wallet? Does it know any tricks that could help me out in a tight spot?
My favorite newscaster/family member/financial celebrity says that annuities are bad
For a long time, a popular refrain went something like this: “Don’t play with annuities, because you’re playing with fire.” Critics cited high fees, high commissions, poor returns, and complexity as reasons why investors should stay far away from annuities. Some financial advisors even built their reputations by proclaiming their hatred for annuities…and then steering their clients toward investment portfolios with high commissions, high fees, high risk, and poor returns.
Part of the issue is that there is such a wide variety of annuities on the market that any attempt to make sweeping statements about their quality, whether good or bad, is at best incorrect and at worst intentionally misleading. In an article for MarketWatch, Stan Haithcock debunks common annuity myths and the reasons we continue to believe them.
To be sure, some annuities do have high fees, poor returns, and highly complex policies. By the same token, some restaurants will give you food poisoning, some cars are lemons, and some girls (and guys) will take your money and your clothes. However, there are also many good annuities. Working with a financial advisor you trust will help you determine what kind of annuity, if any, is right for your needs.
Mick Jagger says an annuity will turn my retirement nightmares into dreams
Mick Jagger is a rockstar and one who, from all appearances, does not intend to retire anytime soon, so we recommend speaking with a real financial professional before making a decision based off Sir Jagger’s advice.
The right type of annuity, with certain additional features (called “riders”), can help you secure a lifetime income with no risk of downside loss. As such, certain annuities can be used as part of a holistic retirement plan, alongside traditional investments, other insurance products, and your social security benefit.
However, an annuity is not a replacement for a retirement plan. While these products can provide enough peace of mind to stave off that nineteenth nervous breakdown, you still need to save, budget, and appropriately diversify your assets. If you are seriously behind in your retirement savings, an annuity may help you make up for lost time, but no investment, insurance product, or tax-deferral strategy is magic.
So, while you can’t always get what you want, with the right retirement plan, you might get what you need.
Sara McKinney
saractag@gmail.com
As Cowen Tax Advisory Group’s Digital Content Marketing Specialist, Sara provides in-house copywriting and manages the company’s electronic records system, email marketing, and blog.
