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A Landfill Investment

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Today, insurance companies are trying to buy their way out of promises on variable annuities. The guarantees have become too costly. Variable annuities with guaranteed lifetime income were aggressively marketed by insurers for years. A lot of salesmen became millionaires on the fees they collected, and insurers were able to mint their own money. In many cases, the fees exceeded 3.5% of assets per year, and most had surrender fees for early withdrawal, which could lop off 7% of your assets on the way out the door.

But now insurers are offering to buy back these variable annuities with lifetime income guarantees at a deep discount. Lifetime guarantees were easy to make when the stock market was generating much higher long-term returns. Today, these insurance companies are looking at lousy returns and fear they won’t get bailed out by a surge in the markets. Hartford Financial Services Group, which was bailed out by the government, and the Transamerica unit of AEGON N.V. are asking customers to trade in their guarantees. According to a Transamerica customer, she was offered 80% of the guaranteed-base value of her annuity. If she sells now, she’s guaranteed to get less than the current base value of the contract.

Why would anyone get involved in such an arrangement, where you’re treated like dirt? It’s simply another example of the insurance companies looking out for their bottom line and not for that of their customers. You want to invest your hard-earned money with a financial fiduciary whose interests are aligned with yours, not an insurance company whose promises are pie in the sky.

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E.J. Smith

Editor-in-Chief
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com.