Anti Annuity Propaganda

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A lot of people are afraid to buy any sort of annuity because of all the scare stories about such products that they have heard from the media and elsewhere. Yes there is some truth to these stories but most of them are nothing but propaganda spread by companies and individuals selling competing investment products.

 

Propaganda or disinformation is to the systematic use of false or misleading information in a deliberate effort to promote a particular point of view. Politicians, advertisers and nations at war often employ propaganda to achieve their goals. The investment industry also utilizes disinformation in an effort to get you to buy the products that it makes the most money from.

 

Unfortunately annuities are not as profitable for investment professionals as many other products. Not surprisingly people that sell investments for a living spread disinformation about the products that they cannot make a lot of money form. Here is some of the anti-annuity propaganda that you might hear from these people.

 

It Will Cost You a Fortune to Get Your Money out of an Annuity

The truth is that it will only cost you extra if you try to cash out the plan or take all your money at once. There is no extra cost if you receive the regular payments from the plan.

 

If you take your money out early you may have to pay additional fees or vesting charges. Many plans are set up so these fees will fall or disappear after a period of time. There are also plans with very low fees you can usually find these by shopping around. The IRS charges a 10% tax penalty on annuity withdrawals for persons under 59½ years old. Persons over that age will pay income tax at their normal rate on both annuity withdrawals and regular payments.

 

Persons who uses annuities for what they were designed as a means of augmenting retire income will not face extra costs or charges. The individuals that pay a fortune usually made the mistake of buying one with funds they needed in the near future.

 

Annuities are a Scam Sold by Sleazy Salesmen

Yes there are some questionable annuities and some sleazy salespeople pushing them but the same can said of any other investment. There are many excellent annuity contracts out there sold by top rated insurance companies. A person who shops around purchases a plan from a good insurer through a reputable sales outlet should have no problems.

 

Salespeople Push Annuities because of the Excessive Commissions Charged

This too is partially true there are some sales people peddling annuities with excessive commissions. The same could be said of many other investments including mutual funds. You should be able to avoid excessive commissions and get a good plan by reading the prospectus.

 

Annuities will not Provide Enough Income to Support You in Retirement

This too is partially true a traditional fixed-rate annuity may only pay a return of 5% that may not be enough to beat inflation. The value of the payment could fall over time. What anti-annuity crowd will not tell you is that there are many plans which provide a much higher rate of return. These included indexed and variable annuities.

 

Something that the anti-annuity propagandists refuse to mention is that annuities have an added layer of protection. The contracts are guaranteed by insurance companies so you will receive the payment as long as the contract is in force. That means annuities unlike stocks, bonds, mutual funds, ETFs, etc. will provide some guaranteed income. This makes them ideal vehicles for persons who want to ensure an additional stream of income for their retirement.