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Guaranteed Income for Life!

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Have you gone to a free dinner yet to hear about the lifetime income guarantee? Unfortunately, a client of mine did. He and his wife were lured in by the free dinner and listened to a presentation on annuities. Afterward, they talked to the guy and agreed to meet with him at their home the next week.

My client called me the day before the meeting with some reservations. He confessed what they had done. And he felt uneasy about the meeting. I educated him on the drawbacks of annuities and armed him with questions for the sales guy.

Clearly, the salesman wasn’t prepared for the inquisition. Seeing that the sale might not happen, he pressured my clients into making a decision on the spot with a pushy comment to the effect of “So, folks, are we ready to go?” No, we’re not.

I hear about these annuity dinners all the time. The first problem is that the retirees who go to them don’t realize that they’re the main course. They’re blinded by the free food, the fancy slides, and the lifetime income guarantees. Hello? Nothing is free.

One question I had my clients ask the salesman was how he gets compensated. His response was “Don’t worry about me, I do fine, but I don’t get paid from you.” Seriously, that’s what he said. Maybe the company signs his checks, but where else does the money come from, the tooth fairy? These guys can make 10% commission on one sale.

My client was told by the salesman that the annuity income was guaranteed for life. He repeated the word “g-u-a-r-a-n-t-e-e.” The last time I checked, that’s against the law. You can’t guarantee anything about future income. By the way, it was the insurance companies making all these so-called guarantees that needed bailing out in the crash of 2008. Believe me, there were a lot of nervous retirees holding annuities wondering if they would ever see their money.

Two more points worth mentioning. The salesman said that now is the time to get your IRAs out of stocks and into annuities. He said Warren Buffett is selling all his stocks and going to cash. Give me a break. Berkshire Hathaway isn’t in cash. And it makes no sense to put IRA money, which is already tax deferred, in a vehicle such as an annuity whose biggest selling point is that it’s tax deferred.

Watch out for these annuity hucksters. Nothing is free, not even the inflation adjuster. It’s on page, like, 865 of the prospectus. Not that anyone reads the prospectus. You need to buy the annuity first to find out what’s in it. No thanks. You’re better off working with an advisor who can set you straight.

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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.