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Greetings,

I just finished reading the Fool School article about annuities and it definitely doesn't sound like a great investment vehicle, but needless to say, the thing that set off my radar was the fact that the salesperson told my parents that they're guaranteed to make 7%, regardless of how well the investments in the annuity do.

So, does anyone have any experience with this company and annuities? Is it possible for a company to guarantee 7% return regardless of the market? This just smells like scam to me, but I want to be able to present some good solid data to my parents to talk them out of this whole thing.


A few things to note:

1) Which type of annuity is it: Fixed or Variable?

2) What time frame is the payout from the annuity? If it is of fixed length like say 15 years then it isn't that hard to picture a 7% payout each year for 15 years. It might be that the annuity pays out for the rest of their lives in which case the insurance company is using various actuary tables to compute a reasonable payout.

3) Is that 7% just for the first year or the life of the contract? Some annuities may have higher initial yields that change over time.

Just my few things to add to this discussion,
JB
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