Annuities are popular among the elderly because they are seen as a low risk, safe investment. Some are willing to forego maximum yields for security, though they understand a long term interest rate will always be lower than a short term one. There are several drawbacks however that suggests an annuity may not be the best option for the elderly.
While the elderly appreciate the security of a guaranteed lump-sum payment for the rest of their lives, their money is inaccessible and there is no way out. Insurance companies will not allow any changes once an investor chooses an annuity option.
Annuities are also characterized by low returns and the potential for higher taxes than other forms of investment. Investments like bonds have tax benefits, but annuities typically do not. The post-tax returns will always be lower than the advertised rate.
Transparency in the annuity market is very low. This makes it is hard to know how an elder’s money is actually being spent. In general, low transparency correlates with a high potential for abuse.
It is also important to take into account the financial security of the insurance company you contract with. There have been countless collapses since 1991 when Executive Life Insurance, the largest life insurance company in California at the time, became insolvent.
Evans Law Firm, Inc. and its attorneys represent victims of annuity fraud, elder financial abuse, life insurance and consumer fraud, insurance and banking fraud, and other types of financial fraud. If you think you or someone you know has been the victim of fraud or abuse, contact Evans Law Firm for a free and confidential consultation by calling 415-441-8669 or by e-mail at firstname.lastname@example.org –if you are in California, please send us a copy of your annuity policy if you would like one of our lawyers to review it for free.