Expert Interview Series: Matt Carey of Abaris Financial On Annuity Insurance And Preparing For Retirement

Matt Carey is the CEO of Abaris Financial, a technology platform that has made the annuity buying process simple and transparent. Matt also writes a regular column on Forbes.com. He previously was a policy advisor at the US Treasury Department where he focused on retirement.

1. One of the tools you offer on MyAbaris.com is an Annuity Finder, to help people determine if an annuity insurance policy is right for them. Can you briefly describe what an annuity insurance plan is and what makes it an attractive option other insurance plans?

We specialize in helping our customers compare income annuities from major insurance companies. The best way to think of an income annuity is that it’s a pension that you buy for yourself. More and more Americans are buying an income annuity for a guaranteed stream of monthly income once they retire that supplements Social Security and covers their fixed expenses.

Unlike many other types of insurance policies and even other annuities, with an income annuity you don’t have any market exposure. That’s really helpful in times like these when the stock market is very volatile. There also are not any ongoing fees with an income annuity, so what you see is what you get.

An income annuity is not medically-underwritten, so actually getting a policy is pretty straightforward. Unlike long-term care insurance, for example, there’s no need to submit a claim. When you get the policy, you just pick when you want income to start and the insurance company starts paying you that exact amount on that date.

The last thing thing about an income annuity is that it’s income that lasts as long as you’re alive. It’s a great way to ensure you don’t outlive your retirement savings.

Some of the factors the Annuity Finder considers are health and finances. What are some good health and financial rules of thumb, for finding the right annuity insurance policy?

Annuities make the most sense if you’re in average or above-average health. In terms of finances, they work great for people who have at least $100,000 in a 401(k) or IRA and know that Social Security won’t be enough to cover all of their retirement expenses.

We rarely think it makes sense for people to spend more than ¼ of their portfolio on an income annuity, but it’s a great way to diversify your portfolio so not all of it is subject to market risk.

We’ve found women to be especially interested in income annuities because such a large percentage of women live into their 90s. About half of 65 year old women today will live past 90 according to the Society of Actuaries.

Once that information’s been factored in, the Annuity Finder offers specialized, personalized advice on what steps to take next. What are some different options that might be available? What aspects do you consider, for an individual, to help them determine the right annuity insurance policy?

That’s a great question and a key part of how we use technology to provide unbiased advice. We look at your longevity estimate, financial situation, risk tolerance and what other sources of guaranteed income you have. All of that factors into our recommendation of whether to purchase an income annuity, and if so, how much and when to start. It’s a pretty complicated decision that we’ve really simplified using technology, but we still usually have a couple of conversations with our clients to make sure there isn’t other pertinent information they haven’t been asked.

In general, we’re huge proponents of purchasing smaller annuities from different insurance companies at different points in time in order to diversify.

You also have options like whether to include a death benefit or inflation rider with the policy.

MyAbaris.com wrote an ebook on Longevity. What are some topics you touch on, in that ebook? How do they pertain to finding the right insurance policy?

We actually have one of the most analytically rigorous and widely used life expectancy calculator on the Internet. Thousands visit it every day. A lot of the people who had used the calculator were contacting us and asking for advice on how to prepare to live a longer and healthier retirement, so we decided to write a guide.

The ebook touches on insurance, but it’s actually much broader and goes into a number of health and financial topics. There are many ways aging is changing how you prepare for retirement and we brought in experts to talk about all of them, along with making sure people had the latest data to make an informed decision.

You can download the free guide here.

MyAbaris.com also offers retirement planning services. What have been some of the most significant changes you’ve seen in retirement, in the last 10 years?

We focus on income annuities. There’s been a lot of product innovation in that market in just the last few years that has made products easier to compare in general and easier to purchase inside of a 401(k) or IRA than ever before.

We are also seeing this wave of Baby Boomers retiring (about 10,000 every day!) and many of them know they need to prepare for a much longer retirement than their parents or grandparents had to.

We’ve also seen more focus on how to manage retirement income. Previously, the only real among financial advisors was how to accumulate assets and not enough attention was being paid to how to manage spending once you actually hit retirement. That’s now changing.

For people looking to start preparing for retirement, can you recommend any particular dependable investments? How might someone go about finding solid investments for themselves?

I am a huge proponent of passive investing. The biggest player in passive investing is Vanguard. Passive investing is the opposite of active investing. With passive investing, the idea is to track the performance of different widely-quoted market indices rather than beat it. Data shows that it’s very difficult to beat the market over the long-term and those who end up trying almost always fall short, especially in the long-run. Passive investing has the added advantage of having much lower fees.

So my advice is to keep it simple, use digital investing platforms that are low cost, and look for passive investments rather than active investments.

And then once you’re nearing or in retirement, make sure that you look at whether lifetime income from an annuity is a good fit for you or not.

More and more retirees are choosing to “age in place” and stay at home, after retiring. For people who need home care, or their loved ones, can you recommend any resources for financing home healthcare?

An annuity is actually a great option for this. Historically, people have tended to buy long-term care insurance, but we’ve seen a lot of insurance companies exit that market, premiums have gone up, and the benefits aren’t as good as they once were. Money Magazine and the Wall Street Journal have both written about this.

Talking about aging is also a touchy subject. For people concerned about their loved ones, do you have any advice on how to broach the subject tactfully?

Aging can definitely be a touchy subject, but I think that’s slowly changing. Here’s the way I think about it – doing what you can to stay healthy not only helps you age better, it also makes you happier. Academic research is constantly enlightening us about how to stay healthy for longer.

In terms of tangible advice, I’d say it helps to always put a positive spin and frame it as “Here’s how you can live a healthier and happier life” rather than “Avoid doing this will make you die sooner.” I’m an optimist and life’s about living it rather than waiting to die in my opinion.

MyAbaris.com has a Retirement Advice tool. What are some things you analyze, to offer retirement advice? How can having solid financial insights help someone find the perfect retirement situation for themselves or their loved ones?

We analyze your health, demographic information, assets, income from a job and your risk tolerance. Importantly, we provide objective advice, rather than make a sales pitch. That’s an important distinction. With the Advice tool, we give users a 1-10 score of whether they should buy an annuity. We tell fewer than half of the people who use the tool that it’s an OK or good fit for them.

I think the best advice is two-fold. First, pay attention to fees. They can really eat into your hard-earned money. Second, make sure you’re getting objective advice first and not a sales pitch. It’s always important to understand the basis upon which someone is providing a recommendation and make sure your interests are aligned.

Want to learn more about preparing for retirement? Speak to a care advisor today.

Disclaimer: Nothing in this interview should not be construed as advice to purchase any particular security.

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