Your Survival Guy’s a big fan of Fidelity Investments, as you know from here, here, and here just to point out a few reasons why. But Fidelity is also a 401(k) powerhouse. I know this because Your Survival Guy worked in Fidelity’s 401(k) division in the mid-90s. So I’m not thrilled to write this, but it’s a big-time foul ball. Your Survival Guy’s not a fan of annuities, especially in a 401(k) or IRA. It’s a tax-deferred vehicle already. It doesn’t belong in a tax-deferred account. The minute you can get out of your 401(k) and self-direct, do it. This is yet another product to charge higher … [Read more...]
ANNUITIES: Have I Got a DEAL for YOU
OK, let’s have some fun. Cue the car dealership ad: “Have I got a deal for you. Come lease this brand-new car for a fraction of what you’d expect to pay. Just come on down and see me.” You get the point. When dealers need the business, you can’t stop hearing from them. Which brings me to annuities. They remind me of a car lease. Because the more options you want, the more you pay, and at the end of the term, they get your money (or the car), not you. If you were in kindergarten and were told about the terms, you’d run. But that’s not what happens with annuities. They’re sold by salesmen who … [Read more...]
American’s Don’t Have Any Money for Retirement, Now This…
You don’t have to look too hard to realize the fix is in to put toxic annuities into retirement plans. First, the Secure Act passes at the eleventh hour last year to allow annuities in 401(k)s (a terrible idea to begin with). Now, states want to require savings plans and you know the next step will be the annuity adoption. What a racket. Bailey McCann reports for The Wall Street Journal: According to data from the National Institute on Retirement Security, 59% of working-age people in America don’t have any money in a retirement account—whether an employer-sponsored 401(k) or an … [Read more...]
Welcome to the Hotel California of Investments
Welcome to the Hotel California of Investments: Indexed Annuities. With surrender fees as much as 10% per year lasting as long as 10 to 12-years, “You can check out any time you like, but you can never leave!” Take caution: Because as money flows into indexed annuities remember that the big winners are certainly the insurance companies and the salesmen (who make 5 to 8 percent of the sale). Penelope Wang explains at Consumer Reports: Unlike regular annuities, which give a fixed payout, returns on indexed annuities rise and fall with the stock market. But these annuities don’t invest in … [Read more...]
Get Ready! The Annuity Onslaught is On
If you haven’t received an email selling you an annuity, get ready because the annuity onslaught is on. Yesterday I received one promising 4%. The fine print explains the egregious sales charges, penalties for early withdrawal (in case you need YOUR money), and a minimum holding period of five years. And your payment is contingent on the insurer being able to pay you. Let’s rewind here for a moment to the debacle that was 2008. If you recall, the insurance sector was on life support with big name insurers trading at less than $5 a share. And that’s not including the need for some to be … [Read more...]
The $9,000 Steak Dinner
The Department of Labor's Fiduciary Rule almost spelled the end for the annuity industry, but with the rule's rollback, Americans can once again look forward to the high fees, pressure sales tactics and poor returns on their money promised by annuities. The Wall Street Journal reports: Lawmakers have panned the product’s high commissions, and Sen. Elizabeth Warren (D., Mass.) has criticized the prizes given to sales agents, like expensive vacations. The estimated average commission received by agents selling certain types of annuities is more than 6%, according to Wink Inc., an industry … [Read more...]
The Ethical Minefield of Structured Settlements
Accidents leading to exorbitant medical bills are unfortunately a part of the reality many Americans face each day. Often medical bills from those accidents end up paid for with negotiated annuities called structured settlements. This is a reasonable arrangement for many victims, but there is occasionally some nefarious behavior attached to the business. Some of the planners who create the structured settlements are offered incentives to steer victims into the products sold by particular insurance companies. These kickbacks could influence planners to recommend plans that aren't in the best … [Read more...]
Beware the Coming 401(k) Annuity Storm
Congress is trying to pass new rules on 401(k)s. There are some good reforms in the current legislation, but one glaring red alert is the increased role of annuities planned for 401(k) accounts in the bill. Annuities can be fee-sucking, performance killing traps enriching the companies that sell them, rather than the customers who buy them. Anne Tergesen reports on some of the drawbacks of annuities: Annuities aren’t often used in 401(k) plans, in part because employers worry that if they pick an insurance company that ends up going bust, the 401(k) participants will sue the … [Read more...]
New Fiduciary Rules Force Annuity Sales Plunge
It turns out, when brokers are forced to look out for your interests instead of their own, they end up selling you fewer annuities. I've been a critic of annuities for years (decades?). Loaded with fees and backed by guarantees that are only as good as the banks behind them, annuities are hawked like a snake-oil retirement solution to unsuspecting investors. I wrote back in 2014 that: The issue is that annuities are sold with a full-court press on those that don’t invest for a living. They’re promised rates of return that sound good on paper but will be wiped out if the insurer goes … [Read more...]
What Happens When Wall St. Wolves Feast on Unsuspecting People?
The Department of Labor's fiduciary rule has many flaws, but one part of the rule that was to be commended (as I did here) was the restrictions placed on variable annuities in retirement portfolios. Now the Department of Labor wants to water down these rules, and allow the wolves of Wall St. to once again slaughter unsuspecting savers with extreme fees and terms that put customers at a distinct disadvantage. Today Michael Wursthorn writes in the Wall Street Journal that the rule roll-back is meant to appease the very wolves who have been taking advantage of retirees for years, the sellers … [Read more...]