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Jun 22, 2016 by |

Santa Clara Annuity Fraud Attorney: Retirement Planning

Re-Inventing the Wheel: traditional vs ‘Modern’ Annuities

Annuities have been marketed to seniors as an essential retirement product for decades, and it’s easy to see why: put your lump sum in up front, and received guaranteed income, with interest, for the rest of your days. This is marketing pitch, and it used to be fairly accurate. However, both the annuity formula and the retirement scenario have changed dramatically, and nowadays annuities can represent a death trap for your retirement savings.

There are two words you should be particularly wary of hearing from your financial advisor or annuity broker. These are ‘variable’ and ‘indexed.’ The first means what is sounds like: your returns, as well as the value of your annuity, can vary, and not always in a good way. While the value and returns can potentially increase above expectations, they tend to do the opposite, and for seniors and retirees counting on a guaranteed income, this variance can throw years of financial planning out of whack. Unless you have sizeable reserves of spare cash, variability is a trait you may want to avoid in your annuity.

Indexed, on the other hand, means that the returns of your policy are tied to a market index, such as the S&P 500. Like a variable annuity, your returns can vary, and like variable annuities, they tend to head downward rather than upward. In addition, if you do beat the odds and the market is having a fabulous year, the annuity company gets to keep the bulk of the profit, essentially by playing the stocks with your money.

Both variable and indexed annuities are fairly recent products, displacing annuities that earned a reputation as modest but certain earners, exactly the kind of product that suits the needs of retirees looking for a guaranteed income. By promising market rate returns with no risk of loss, annuity brokers and companies have given the product a bad name when the annuities they sell fail to live up to the hype. Annuities are coming under scrutiny from both the Department of Labor and FINRA, with promises of cracking down on a market that has gotten out of control. While this will certainly help future annuity buyers, there are many consumers who have already invested substantial amount in policies that may be ticking time bombs. Annuities can tie up savings and suck out seniors finances.

Some of the major annuity and life insurance providers are:

If you or a loved one has been the victim of an improperly sold or administered annuity or life insurance product, contact the Evans Law Firm at (415) 441-8669, or by email at Our Santa Clara annuity fraud attorneys can review your policies and help provide advice and counseling free of charge. We also handle financial and physical elder abuse, qui tam and whistleblower cases, and nursing home and long term care insurance.

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