Comments on: The Last Retirement Account Standing

By: jho87

jho87 — Fri, 06 Feb 2009 18:24:33 +0000

I like your post and look forward to hearing what else you have to say!

By: Darrell

Darrell — Tue, 02 Dec 2008 17:09:51 +0000

Great Blog, insightful, & well written. I’m looking forward to reading more from you.

Thanks,

Darrell

By: DrShelby

DrShelby — Mon, 01 Dec 2008 16:47:11 +0000

John, What you are pointed out regarding fixed index-linked annuities is accurate. However, please be aware that exactly the same criticisms can be levied against mutual funds, diversified portfolios, etc., yet seldom do I see such criticisms in the media from “professionals” who offer such products. Any investment choice can be misrepresented, and generally is by some. Bear in mind that index-linked annuities are long term investments, will not experience market losses (even in a severe meltdown like we have currently) if held for term, provide tax deferral and have no more fees that other “packaged” investments like mutual funds, UITs and VAs — like bank CDs the fees and charges are implicit rather than explicit. While the media has spent a great deal of time documenting how annuities have been misrepresented to retirees, they have not given equal coverage to the losses from unsuitable products like mutual funds, VAs and stocks/bonds that should never have been sold to risk-averse, retirement-minded retirees in the first place. I find it curious that securities regulatory now want jurisdiction over index-linked annuities when they can’t even police what they are responsible for. I also find it curious that any saver who purchased a fixed index-linked annuity in the past several years has not lost one cent due to the market meltdown — granted they haven’t make more than the minimum guarantees but at least their return has been positive and they still have upside potential. Thanks for your comments.

Shelby Smith, Ph.D.

By: Peter Sloan

Peter Sloan — Fri, 28 Nov 2008 16:38:30 +0000

Your blog is a breath of fresh air in a room full of smoke and mirrors. Chris CoxHas been wrong all along about fixed index annuities and he had a hand in destroying the financial markets when he eliminated the uptick rule for short sellers.

Keep up the good work.

Peter Sloan
Registered Principal
Insurance Broker

By: John Morgan

John Morgan — Fri, 07 Nov 2008 18:02:16 +0000

The discussions I find of state or federal regulators, analysts, newpaper columists, consumer magazines, and consumer advocates making disparaging remarks regarding annuities all relate to variable annuities and equity indexed annuities. Not immediate fixed annuities. With respect to indexed annuities, the issues of concern are that there are a variety of: fees and charges, limitations on accumulation, calculations of index values, and other detailed features incorporated into these products. The contracts can be exceptionally complex and prospective purchasers can have a difficult time comparing one indexed annuity to another. Surrender charges can be as high as 20 percent of the amounts invested. And although these charges decline to zero over time, that process can take (depending on the contract) more than 15 years. If a purchaser needs money sooner for some emergency, he can be forced to forfeit a substantial amount of the investment. Although contracts guarantee a minimum value, it’s typically less than what the investor gives the insurance company in the first place. The worry of course is that the negative attributes of these products are often not being adequately disclosed by sales agents, oral sales presentations conflict with the fine print of the contracts, and that senior citizens (who are most often the targets of the solicitations) do not understand what they are getting into. The other concern is that because of the attributes of some of these products, they are not in any case suitable for the persons to whom they are most often sold. The issue highlighted in many of the articles and press releases is that sales agents have often been more interested in the high commissions these products generate than in the financial well-being of their customers.

By: DrShelby

DrShelby — Fri, 07 Nov 2008 16:22:20 +0000

There have been numerous disparaging remarks by regulators about fixed annuities — especially fixed index-linked annuities. Google the following then you find some gems:

Christopher Cox, Chairman of the SEC;
Joseph Borg, Securities Commissioner of Alabama;
Lori Swanson, attorney General of Minnesota;
Mary Schapiro, CEO of FINRA;
William Galvin, Secretary of Massachusetts. Plus there are others.

You’ll notice one thing in common with all these — they are allied with the brokerage industry or they aspire for higher political office. It is now patently obvious that fixed annuities — including index-linked fixed annuities — are far less risky that market investments like mutual funds, variable annuities, stocks, bonds, etc. At this time the market is off by 50% from year-ago levels and massive losses have infected every “market-based portfolio” – including 401(k) accounts — yet fixed annuities have no losses nor are they possible. While the brokerage industry likes to talk about prospective failures of insurance companies, none has materialized — AIG Corporate demise had nothing to do with insurance but rather unregulated CDSs. Ironically, Wall Street is still preaching the merits of market investments as if the market were not in meltdown and the primary player not in bailout mode from the federal coffers. While fixed annuities are not for everyone, they certainly seem to be “the” safe harbor for retirees and those in the retirement red zone before retirement. Such cannot be said for market-based investments — not in the short-run or in the long-term.

Shelby Smith, Ph.D.

By: John Morgan

John Morgan — Fri, 07 Nov 2008 14:37:05 +0000

The “trash talk” has been on variable annuities. (Appropriately so.) Can you cite an example (link to the press release or speech please) of any state or federal regulator making a disparaging remark regarding fixed annuities?