Annuities

I’ll summarize my takeaways below, but if you have 20 minutes, watch this entertaining segment from John Oliver: “Retirement Plans: Last Week Tonight with John Oliver”

We often evaluate an investor’s portfolio and see a variable annuity as part of the portfolio inside or outside an IRA. I believe they are over-used and should be evaluated carefully. There are a number of features that I dislike:

A recent FINRA investor alert gets right to the point: “The marketing efforts used by some variable annuity sellers deserve scrutiny—especially when seniors are the targeted investors.” As if these products weren’t complicated enough variable sales pitches are sometimes tailored to confuse. Others employee scare tactics and share false claims.

We all enjoy playing a game we can’t lose but investing in the stock market is not one of them. However the promise of “guaranteed returns” led shell-shocked investors to pour nearly $30 billion into index annuities in 2009 even as they pulled $9 billion out of U.S. stock funds.