Bloomberg Businessweek – Retirement Made Complicated
Discussed in this new article from Bloomberg Businessweek titled, “Retirement Made Complicated” by Aaron Pressman; why equity-indexed annuities have a bad name and what investors need to know.
In the piece, the AnnuityAdvantage.com website is referenced as a good information resource and comparison shopping tool for indexed annuities.
Here are a few excerpts from the story.
Equity-indexed annuities are getting perhaps the worst press and the most regulatory scrutiny of any financial product pitched to individual investors. The biggest knock on the annuities—which let you share in stock market gains with minimal risk of loss—is not the investment itself. Instead, it’s the hardball sales pitches that critics say didn’t adequately explain fee structures, especially the early-withdrawal penalties.
Here’s how the indexed annuity works. An investor buys a policy with a one-time purchase—typically a minimum of $5,000 or $10,000. The term may run from 4 to 12 years, and the payoff is linked to the stock market. The big selling point—one that gives it a lot of appeal to risk-averse sorts—is that the annuity’s value doesn’t decline if the market does.
If this no-loss policy sounds too good to be true, it is. The annuity owner doesn’t get all of the stock market’s gains, and forget about the dividends. That’s the giveback—in effect the insurance premium—that pays for the downside protection and the minimum guarantee.
Comparison shopping is a challenge. “The features vary so much from company to company, they can be tough to figure out,” warns Moody. Another difficulty is that many insurance agents sell annuities from only one or a handful of companies. The Web site Annuityadvantage.com makes gathering info easier because it carries quotes on annuities from some 50 insurers.
Even if you think you’ve done a thorough job parsing the details and you buy an annuity, review your work. In most states, there is a “free look” period, typically 10 to 20 days from the date of purchase, that lets buyers opt out with a full refund.
To read the full article, go here: