The following is real conversations with clients.

Recently I was called by the Daughter of an 80.5 yr. old Widow. She had an Index Annuity that was finally going to be past its 10yr. surrender charge next year. This annuity was sold to her after her Husband passed. She was getting a lot of calls from her agent telling her she needed to change it now to a new annuity. He told her it would not be a taxable event because they could just exchange it. In order for her to get the big bonus, she had to do it now. Reality is, when her current annuity matures past the surrender charge, she will be too old by the insurance company’s rule to buy a new one. Not only would she pay a 6% charge to surrender the current annuity, she would be locking herself into a new 7 yr. surrender time frame. She wants liquidity and safety. An annuity, in any form other than a 1yr fixed, would not give her liquidity.
This recommendation would not benefit the Widow, only the agent. I received a similar call last week from a 78yr. old woman who put $500,000 into an annuity with similar features as mentioned and feels this was the worst decision for her. The agent made it all sound so good. Now she feels her hands are tied. Not all representative that sell annuities are like this but this is a story I hear too often. Annuities can be a great addition to many investment portfolios but it is truly a “buyers beware” investment. Make sure that you totally understand all of the features and restrictions of an annuity, no matter how great an agent can make it sound.

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