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Investigation calls annuities into question: Are they right for you?


Annuities can provide financial protection when used wisely.

Annuities are financial tools that can help families planning for retirement to protect their assets or convert them into an income stream. These, along with other financial tools, are often sold by financial advisors. Unfortunately, not all financial advisors are motivated by helping families find future financial stability and protect their assets. In some cases, advisors are motivated instead by financial incentives. In exchange for selling certain products, these agents can receive rewards like fancy vacations or vehicles. A recent report by Massachusetts Senator Elizabeth Warren brings media attention to this issue.

What did the report find?

The report’s title speaks for itself: Villas, Castles, and Vacations: How Perks and Giveaways Create Conflicts of Interest in the Annuity Industry. Essentially, Senator Warren calls attention to the flaws within the annuity sales process. According to the report, the process focuses on kickbacks to agents in exchange for selling financial products. The presence of the kickbacks is then concealed from customers. The data was gathered through an investigation that involved fifteen of the nation’s leading annuity providers. From this investigation, researchers found 87 percent of companies admitted to offering important to note that the financial products themselves are not faulty. Instead, the methods used to sell certain financial products are at issue. For the right families, these products can be sound financial tools. However, the report contends that the agents selling these products are not motivated by providing the right tools for the right families. Instead, they are motivated to sell high numbers of the product in exchange for “lavish cruises, luxury car leases, and other perks.”

What is an annuity?

Annuities are defined by Black’s Law Dictionary as a yearly sum stipulated to be paid to another. Contracts for annuities are further defined as those that involve one party agreeing to deliver to the other party a sum of money with the agreement not to reclaim the money as long as the receiver makes the payments as agreed. Essentially, this means that a person purchases an annuity through an insurer for a set amount of money and to earn a certain return. With a deferred annuity, the payments are planned to be paid sometime in the future and usually involve a penalty if the funds are needed before that time. With immediate annuities, on the other hand, the insurer begins making these monthly payments immediately. Immediate annuities can be helpful in long term care planning.

Is an annuity right for you? Legal counsel can help.

Determining which tools are right for your unique financial situation and needs can be intimidating. As a result, it is wise to seek the counsel of an experienced elder law lawyer. This legal professional will review your situation and discuss the various options that are available for you, advocating for your rights and working to better ensure that your assets are protected.