Annuity Refresher

Last week at a luncheon I attended everyone in the room was asked to introduce themselves and give a brief overview of what they do. One woman’s introduction stood out. She introduced herself and then said “I sell people lifetime income streams. I don’t deal in stocks, bonds, or mutual fund investing. I give people the certainty of income.” I then overheard this same woman talking to some of the other professionals in attendance about the annuities she sells and that they were a much better place to put your money than investing in the market. After she left, I handed each person she was speaking with my business card and told them before they purchased an annuity to please call me to get a second opinion. While stocks, bonds, and mutual funds may be scary to some people, annuities should be frightful too.

There is no doubt some types of annuities have a place in certain portfolios. Given the historic low interest rates on fixed income, investors are looking for a place to put their cash, and annuities can appear attractive. However, annuities can be wrought with high fees, surrender charges, and hidden costs. A few years back, Chris Frayne did an excellent Sigma Summaries newsletter, “The Devil is in the Details”, on what to watch out for in annuities. I thought it would be a good time to circulate that newsletter again to remind our clients and friends of the issues surrounding these products.

As always, we are available to answer any questions in order to help you make the best decisions regarding your finances.

Marisa A. Lenhard, CFA, CFP®