Search This Blog

Sunday, February 5, 2012

The Evil of Annuities.

The financial- and not so financial -media just love protecting their readers from  . . . look out!  Be careful!  Oh no!  ANNUITIES!!  Be very afraid!  Every article I've read (and I don't use absolutes lightly) recommending against annuities commits one or more of these errors:
  • Invalid comparisons.  For example, saying annuities have "high fees" without describing to which kind of annuity they refer or to which alternative they are comparing.  Variable annuities indeed have high fees, as much as 3-4%, even when you are losing money, compared to virtually every other investment alternative outside of hedge funds!  Variable annuities are market-based and can lose money.  Fixed  and Indexed annuities do not, are not, and cannot.  Some have no fees.
  • Outright false or outdated information.  For example, the most common claim is "Your money is tied up for ten years.  Or longer!"  Well guess what.  In exchange for principal protection and minimum rates that are 3-4 times higher than CD rates, the annuity company needs some built in stability in return.  Plus, your money really isn't "tied up".  Virtually all annuities provide annual liquidity of 10% or greater.  And with all the annuities I offer, penalties decline and vanish no later than the 10th year, or altogether in the case of death, terminal illness, or need for long term care.  The point is, annuities are for your long term safe money!
  • Focusing on the irrelevant.  For example, "annuity salesmen earn huge commissions!"  Even if that were true (it's not) so what?  Annuity commissions are less than those you pay for houses, cars, prescriptions, electronics, and a whole slew of other things you buy.  Annuities are complex and always changing, the market is very competitive, and- because of the media bias about them -it is difficult to educate a paranoid public about them.  The relevant question is, "Does this particular annuity accomplish your financial goals better than any other alternative?"  That is my sole focus when I select an annuity product.  The answer is very often, "Yes".
 But yes, fixed annuities are so bad that billions flowed into them, and out of Wall Street, last year.  They are so bad that Hartford, which previously sold only variable annuities (which can lose money), came out with two fixed indexed annuities late last year.  They recognize that everyone wants at least some of their money guaranteed without losing it to the stock market, taxes and inflation.

If you want the facts, call or email for my free DVD, "The Reinventing Savings Program".  Or, watch it now online at Reinventing Savings

No comments:

Post a Comment

Your Constructive Comments Are Welcome!