Perhaps it’s because I’m getting older (I turned 66 last week), but as time goes on, my opinions about money and investing are changing.

Ten years ago, I didn’t own a single dividend-paying stock. Virtually all of my stock positions now earn at least a 3.5% dividend.

That’s a huge shift for me.

But what is most surprising to me is how my opinion of annuities has changed.

The last year I worked in the brokerage business, I was with a bank that specialized in converting maturing certificates of deposit (CDs) to annuities. Essentially, when a person came in to renew a CD or to withdraw their money, the broker in the branch was tasked with turning it into a high-paying annuity sale.

High-paying for the broker, not necessarily the client…

And if you speak to most people in our business who aren’t annuity salesmen, they’ll tell you that situation hasn’t changed.

I left the bank because of the pressure to sell only annuities. I couldn’t recommend what I believed were overpriced and underperforming investments.

So what’s changed? Not much with annuities, but everything in my world.

A friend of mine from The Beach Grille where I eat breakfast every morning (that’s the basis for my GQ, or “Grill Quotient”) is probably the best example of my change of heart.

He taught at a high school for 30 years and coached football for 25 of them. He’s a couple years older than I am, but from the same generation: the boomers.

And, as I have pointed out many times in this piece, he is one of the millions of boomers who have had no education or training in personal finance or investing.

He is an accomplished, intelligent person who is one of the multitude of victims of the boomers’ complete lack of any preparation to handle money, savings and investments.

In a recent conversation with him, he asked me what I thought of the annuity he owns that provides the bulk of his income in retirement.

He knew very little about it. That’s not unusual. Most retired people I speak to down here have little or no knowledge about the ins and outs of the investments they own.

In most cases, they trusted the person who explained it to them – their advisor – and appear to be satisfied with what they own and what it’s paying them.

And this lack of understanding about the particulars of what people own is not exclusive to annuities. Well-educated, successful people who ask me to look at their portfolios almost without exception give me the palms-up salute when I ask them about the funds they hold.

If I were to tear into my friend’s annuity, I know I would find a lot of opportunities to make more money for him and pay much lower fees with either bonds or the right stocks. There is no doubt about it.

But at this point in his life, I wonder if it would be worth it to him. I could easily take him from 3% or 4% per year to 5% to 7%, but I’m not sure it’s the best move.

As much as we on the income side of the investment world are convinced of the safety and reliability of what we recommend, there are those who I believe are better off in packaged, opaque investments.

And annuities are as opaque as they get.

Nothing has changed since the days when I worked for the bank. Annuities are expensive – in some cases crazy expensive.

They are as complex as the insurance industry can make them.

And the returns annuities pay are certainly less than what we can earn in dividend-paying stocks or in the bonds I recommend.

But for those who have no understanding of investments, especially the ups and downs in the markets, I’m not certain avoiding or moving out of annuities is best.

Do I still believe you’re better off in a corporate bond with solid fundamentals or a dividend-paying stock with a history of growing its dividends?

Absolutely! There’s no comparison.

But the key to security at our ages is to stay well within our risk envelopes and comfort zones. I’m sure it’s my 66 years speaking, but for a generation that has had zero preparation to manage investments, the sense of security an annuity can offer outweighs minimizing fees and optimizing returns as the primary goal.

They’re expensive and confusing, the yields can be subpar, and they certainly aren’t for everyone. But in certain situations, they do have a place.

Good investing,

Steve