WEALTH MATTERSThat Bland Annuity Notice May Be Anything but RoutineBy PAUL SULLIVANInsurance companies that sold annuities before the downturn are sending letters to clients lowering the generous pre-crisis benefits.http://www.nytimes.com/2013/07/13/your-money/annuities/that-...Buy these things at your own risk.If you are crazy enough to buy one at all.AM
I'm sure clients thought when they bought the annuity it was binding contract on both parties. Apparently not if one party is an insurance company. Long Term Care purchasers have learned that too in recent years.
These parts of the article make me wary of annuities:It’s worth noting that all of these changes are legal, and the company’s right to do what it is doing is detailed in contracts that stretch to hundreds of pages. That is part of the problem, of course, since people often do not read those contracts closely.I doubt I would understand all the details in a contract that is hundreds of pages. I doubt most advisors understand all the details either. The aphorism "never invest in something you don't understand" applies.Jerry Golden, president of Golden Retirement Advisors, is credited with creating the first guaranteed minimum income benefit for a variable annuity when he worked at AXA in the mid-1990s.“One of the fundamental problems is that most of these variable annuity products are sold based on marketing materials and marketing hype, and there is no standard way to compare them,” he added. “It really never happened that these products were turned inside out to show the customers the upsides and downsides of them.”I can read lots of straightforward analyses of stocks, bonds, and housing markets. I easily understand the pros and cons of each asset class. But when it comes to annuities things are different. The fact that Dave does not have a standard analysis of annuity performance is a case in point. He must create his own. Why? Stock performance, bond performance, housing market performance are all readily available.
If you aren't trying to hide loopholes you can write the contract in a couple paragraphs.
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