Annuities in the News
In the latest AARP bulletin, October 2012, there was a short review of an annuity sales scam involving seniors and deferred annuities. Older consumers are often a target for annuity sales and scams. Some annuities simply are not suitable for some elders due to high risks and early withdrawal penalties that tie up retirement savings for years, sometimes years past their average life expectancy.
Annuities are a common part of retirement financial planning and serve a particular purpose of securing an income stream in return for premium(s) paid. There are different kinds of annuities; single premium, multiple premium, immediate annuity and deferred payment annuity. As the name implies “deferred” annuities are annuities in which income payments are delayed for many years and further which often have early withdrawal penalties making it costly to use this money in a different manner if an emergency arose.
The deferred payment option, scrutinized in the AARP bulletin, came under criticism again as being unsuitable for some elders by the National Association of Insurance Commissioners. The study, reported in the latest NAELA newsletter, indicated the deferred annuity strategy was frequently utilized in VA pension benefit planning and actually could financially harm some elderly veterans. The bottom line is to always seek guidance from a trusted advisor before making large investment decisions.