Author Topic: Parents *SOLD* into a 10 Year Indexed Annuity - Could it be Worse?  (Read 1594 times)

jeff2017

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Admittedly, I am no annuity expert, seems most can't even decipher exactly what these products even entail, but can't help but think my parents got taken for a ride today, while there is nothing I can do about this, it is veryyy aggravating!

My grandmother died 1 month ago and my parents have been going through the estate. Tonight my Dad informed me that his "investment advisor" reviewed the "investments" that were now passed to him from my Grandmother (these "investments" were NOT with his "advisor"'s firm, but with another high fee leach, a big name you would know).

Apparently, nearly all of the money was in bonds. My Dad's advisor apparently told him how bonds are risky, particularly in the last few years. He proceeded to convince them to move ALL of the money out of the bonds at the other firm and to invest ALL of the money in a 10 year indexed annuity.

The conversation with my Dad was not all that long, but he mentioned the "bonus" he will receive, which was approximately 10% of the total amount. He has bought annuities in the past with "guaranteed returns", so I asked if that was part of this annuity and he said, "There is no guaranteed return on this one, but there is a cap, the most I can make in a year is 4.9%". He also said the most he could take out is 10% per year, penalty free.

Based on what I've read about these snake oil salesmen online, my parents are the perfect mark, the fear tactics about losing money would play quite well with them.

I know this is not my money, but can't help but be pissed at these "advisors" for preying on them and not happy with my Dad for just making such a rash decision so quickly.

On a scale of 1-10 just how "bad" are these 10 year indexed annuities? I know commissions on annuities are sky high, anyone have any clue as to what these "salesman" will take down from today's sales pitch? I bet they are drinking a beer tonight talking about all the money they extracted from my grieving parents, makes me sick.

One last note: These "advisors" have progressively converted my parents to nearly 100% annuities in the last 5 years. Seems everytime I hear about the latest one it's a longer term, but tonight's 10 year annuity is by far the longest term so far.
« Last Edit: November 29, 2018, 10:05:42 PM by jeff2017 »

reeshau

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Re: Parents *SOLD* into a 10 Year Indexed Annuity - Could it be Worse?
« Reply #1 on: November 30, 2018, 03:13:19 AM »
Is this financial advisor actually an insurance salesman?  It seems strange that he would go 100% annuities.  An investment house may look at a REIT, Load mutual fund, MLP, or some other gravy train to "diversify."

Just thinking of action you could take:  do you have a financial planner you use?  Or could you scope out a fee-only planner for your parents?  It seems to me that, if they insist on working with an advisor of some sort, you could put some of your discomfort to rest by vetting one for them.

coppertop

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Re: Parents *SOLD* into a 10 Year Indexed Annuity - Could it be Worse?
« Reply #2 on: November 30, 2018, 08:17:03 AM »
My mother-in-law was sold an annuity in her late 70s.  She doesn't understand annuities (or any other investment, for that matter), and I believe it was highly unethical for this 'broker' to sell her an annuity.  But she won't accept advice from family, believing she has all the answers, so all we can do is sit by and watch her make mistakes.  She's now 83 and having memory problems, so this is just going to get worse.

Apostrophe

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Re: Parents *SOLD* into a 10 Year Indexed Annuity - Could it be Worse?
« Reply #3 on: November 30, 2018, 09:59:55 AM »
Most products like this have a "free look" period where you can cancel the contract without penalty. Essentially it is a buyer's remorse clause.

Annuities have a time and a place, but if you/they are uncomfortable with the purchase, now is the time to reconsider.

SwordGuy

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Re: Parents *SOLD* into a 10 Year Indexed Annuity - Could it be Worse?
« Reply #4 on: November 30, 2018, 11:51:42 AM »
Did they meet in your parents home?  If so, you've got a couple of days to cancel it.

Can't help in any other way, sorry.

MDM

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Re: Parents *SOLD* into a 10 Year Indexed Annuity - Could it be Worse?
« Reply #5 on: November 30, 2018, 01:00:32 PM »
On a scale of 1-10 just how "bad" are these 10 year indexed annuities? I know commissions on annuities are sky high, anyone have any clue as to what these "salesman" will take down from today's sales pitch? I bet they are drinking a beer tonight talking about all the money they extracted from my grieving parents, makes me sick.
If 10 is "lose all their money" it's not a 10.  They may not even lose money on an absolute basis.  But it's probably closer to a 10 than a 1, because they will likely do worse relative to what a simple 50/50 stock/bond allocation (or similar) in index funds would do.

You are likely correct in all your assumptions about this product.  And, if they have just signed today, as others have mentioned they may be able to cancel for free.  Whether your parents will choose to listen to you is another question.

Turkey Leg

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Re: Parents *SOLD* into a 10 Year Indexed Annuity - Could it be Worse?
« Reply #6 on: November 30, 2018, 01:37:27 PM »
They used to be known as equity-indexed annuities. Never buy them. They are complex products, laden with fees...a terrible investment!

https://forum.mrmoneymustache.com/investor-alley/equity-indexed-annuity/

ThatGuy

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Re: Parents *SOLD* into a 10 Year Indexed Annuity - Could it be Worse?
« Reply #7 on: December 01, 2018, 10:54:24 AM »
I came across this article and immediately thought of this thread.

https://www.nytimes.com/2018/11/30/your-money/retirement-annuities-steak-dinner.html