When it comes to planning for your retirement, it’s easy to get sidetracked by the opinions of well-meaning friends, family, and even acquaintances.

Maybe your husband’s sister’s co-worker’s great-uncle Fred had a negative experience with an annuity, or you’ve heard stories from a neighbor who swears off anything related to the stock market because it just "gambling". 

While their advice may come from a place of good intentions, it’s crucial to remember that their experiences, biases, and financial goals are completely different from yours.
 

Your financial future and retirement strategy should be based on your unique needs and goals — not the outdated or misguided opinions of people who may not understand your financial situation. In this article, we’ll explore why it’s important to filter out irrelevant advice and focus on making decisions that align with your personal circumstances, particularly when it comes to annuities.

 

Stay Mindful of Biases
 

We all have belief systems and biases that shape our financial decisions. These biases are often formed from a variety of sources, including research, second opinions, articles we've read, testimonials from family members, or personal experiences. Some people have a strong aversion to annuities because they associate them with high fees or poor experiences. Others may have had fantastic experiences with real estate or the stock market and are convinced that “annuity products” are a bad choice for anyone.
 

But here's the thing: All financial products have pros and cons, and just because someone has had a negative experience with one doesn’t mean that’s true for everyone. As we’ve discussed in previous articles, many of the old, negative perceptions of annuities (like high-fee variable annuities) no longer apply to modern products.

Today, there are low-fee, flexible, and highly beneficial annuities that provide guaranteed income and protection against market downturns — features that can be invaluable as you age.
 

Here’s a little exercise: if you search online for “The Nasty Truth About __________” (fill in any financial product, such as stocks, real estate, or life insurance), you’ll find no shortage of negative articles filled with criticisms. These criticisms are often written by people who either had a bad experience or have a personal bias against that financial product.

But remember: every financial product exists because it serves a specific need, and when used appropriately, it can be beneficial.
 

In fact, most of the “horror stories” surrounding annuities — like high fees or inflexible contracts — could likely have been avoided with proper financial education. The key is understanding how to use them effectively and knowing when they are a good fit for your situation. Before deciding that any product is inherently bad or good, it’s important to understand the full picture, including both the advantages and the disadvantages.

 

Ask Questions and Do Your Own Research
 

Maybe you’ve heard from a well-meaning relative, like Uncle Fred, who had a bad experience with annuities back in the 90s, and now he’s warning everyone to stay away. Or perhaps your current financial advisor tells you to stay the course and avoid making any changes. It’s important to remember that what worked for someone else may not be the best option for you, and in some cases, what’s being advised might not even be in your best interest.
 

At the end of the day, it’s your financial future on the line, and the advice you receive should be tailored to your unique situation. When seeking second opinions, ask yourself how qualified the source is to provide guidance in your specific financial context. While getting feedback from others can be helpful, you shouldn’t allow yourself to be swayed by opinions that are not grounded in your personal goals, needs, or retirement plans.
 

For example, let’s say you’ve been researching annuities, and you believe they could be a good option to provide you with stable, guaranteed income in retirement. If you then hear from a friend or family member who claims annuities are a “bad idea,” don’t just take their word for it. Do your own research, talk to professionals who specialize in retirement income planning, and ask questions about how annuities can fit into your overall financial plan.
 

It’s always sad to see someone walk away from a potentially solid financial planning option because they were “spooked” by a well-meaning but misguided second opinion. Take the time to educate yourself so you can confidently make the right decision for you — not based on someone else’s fears or biases.

 

When Greed Is Allowed to Rule
 

One of the most common traps retirees fall into is chasing excessive returns during the income/preservation phase of life. It’s tempting to want to make more money, but taking on too much risk with money you can’t afford to lose can be a dangerous game — especially as you approach retirement.

Many retirees have seen the stock market perform well and decided to invest more heavily, hoping to increase their returns. However, this can backfire when market downturns hit and you find yourself losing more money than you can afford.
 

The lure of excessive returns can often cloud your judgment, but the truth is that major losses in retirement can have a far more devastating effect on your lifestyle than major gains would have a positive effect. The loss of principal during a market crash, for example, can result in a significant reduction in your monthly income — something you can’t easily recover from.
 

Additionally, the desire for inflation protection isn’t always a valid reason to chase higher returns. If you’re focusing only on inflation protection, you might find yourself in a situation where you’re losing more than you’re gaining, putting you further behind the curve.
 

The truth is that a more consistent, prudent return over time is likely a far better strategy for retirees than chasing high-risk opportunities for higher returns. Safety, stability, and predictability are the core concerns for most retirees, and annuities can provide these in ways other financial vehicles can’t.

 

When Fear Is Allowed to Rule
 

Everyone has financial fears, whether it’s the fear of loss, the fear of running out of money, or the fear of missing out on better returns. Fear is natural — especially when you’re facing important decisions about your financial future. But unchecked fear can lead to inaction, poor decisions, and an inability to move forward with confidence. Fear can cause you to second-guess yourself and make decisions based on emotions rather than on sound financial planning.
 

For example, some people fear they might be judged for making a bad financial decision, or they might fear the loss of money if they choose a product like an annuity. While these fears are understandable, the most powerful weapon to combat fear is education.
 

When fear is controlled, it can help you make cautious and prudent decisions. However, when fear gets out of hand, it can lead to paralysis or force you to make inferior decisions. Sometimes, fear can push people away from genuinely superior options in favor of more comfortable, but ultimately less effective, choices.
 

Knowledge = Power = Conviction = Confident Action.

The more you learn, the more confident you’ll become in your decisions. With education, you can make better-informed decisions and choose strategies that are designed to give you the most security and peace of mind in retirement.

 

Conclusion: Filter Out the Noise and Focus on Your Needs
 

It’s easy to be influenced by outside opinions, especially when they come from well-meaning individuals like Uncle Fred, your sister’s co-worker, or even your financial advisor.

But the truth is, their experiences and their financial goals have little to do with what is right for you.
 

Instead of getting caught up in biased opinions or outdated advice, take the time to educate yourself.

Understand the options available, ask questions, and seek out professionals who specialize in retirement income planning.

Remember, your financial future is personal, and the right solution for you may not be the right solution for anyone else.
 

So, the next time someone tells you that annuities are a “bad idea” or that you should stay away from them, remember: you’re not planning for Uncle Fred, your neighbor, or your co-worker.

You’re planning for your future — and the more you learn about the products and strategies that can help you achieve your goals, the more confident you’ll be in the decisions you make for your financial security.