Gains To Income Stream?
With this backdrop, an oldie-and-not-very-goodie (but correct). If an advisor says that an annuity is always bad and that he/she will always outperform. The error is that entirely presumes that markets only go higher (in which case, yes, annuities will underperform, but that isn’t the function).
It is vital that people understand the role of a contract, and then measure its success based on THAT ROLE, and not compare it to other statistics. An annuity’s role is not for absolute return, so when it underperforms in a market that goes higher, you need to remember that was not the objective from the beginning.
Can you replicate an annuity? Perhaps. Can your advisor guarantee outperformance? If this statement is ever made to you, run. There is a word in the advisor community, annuicide. The reason is that if you deposit into an annuity, that is reducing the advisor’s fee, even if the reason for an annuity was completely rational.
It has traditionally been commonly believed that you don’t deposit into an annuity with pre-tax funds (401k, IRA). Candidly, I have found this guidance very very odd. Now, the Secure Act will certainly make annuities an option inside 401(k)s, etc.