The Truth about Annuities

I do a weekly radio program on finance. It comes on each Sunday morning on WGTK-FM 94.5 The Answer. It takes a lot of prep work each week to produce content that people can actually use in their own financial and retirement planning. We have gotten some very good comments recently from people who say they listen to us on the radio each week and we always give good information that they use to make their personal decisions about their finances. We don’t actually do the show live, we record it at our office during the week, then forward it on to a producer. Once the producer has added the music and ads, he sends it to the radio station as a finished 54 minute program. I enjoy doing it, and I hope it comes through to the listeners. Many people have asked me why I started doing a weekly radio show. It’s because there are 15 shows that come on each weekend, hosted by 9 providers (some shows air more than once). Of those shows, only one other person is a CFP® Practitioner besides me. He is a friend of mine who provides good content, but he does tend to drift into the weeds a little. Two of the shows are advertising a do-it-yourself approach to investing. They tell you that by following their “system” you can make 2 to 3% each month doing your own trades. In my opinion, if they could do that, they wouldn’t be teaching you how to trade stocks, they’d be running a multi-billion dollar hedge fund somewhere. The other eleven shows that come on each week on the two upstate talk radio stations are product pushers. They have a particular financial product they want to sell you. They can dress it up and make it sound wonderful, but it is still an annuity sold by an insurance company. You can tell they’re selling them by the language they use on the radio. When they tell you to stay out of the “Wall Street Casino,” they’re selling an annuity. When they tell you to stay off the “Stock Market Rollercoaster,” they’re selling an annuity. When they say they want to set you up a “Pension-Like Income,” they’re selling an annuity. When they say “Guaranteed not to lose,” they’re selling an annuity. “But,” you may say, “all those things sound wonderful. Why wouldn’t I want that?” My answer is that while those things do sound good, it is not the ‘whole’ story. And you’re not likely to get the whole story from them, because those annuities are the only arrows many of them have in their quivers. I met with a nice man a few weeks ago who bought two of those products from one of those radio annuity salesmen ten years ago. The stock market had just spent some time going down and he was scared. The salesman, who is on the radio each week, told this gentleman that the product he was selling would go up if the market went up, but could not lose if the market went down. That sounded good to this gentleman, so he bought it. And four years later he bought another one. What he said he wasn’t told was that these annuities were capped at (meaning they could not make more than) 2.35% per year, forever! These annuities also had an 18 year surrender period where the penalty for withdrawing all the money in the account started at 15% and continued at that rate for 7 years. In other words, folks, the annuity was tilted entirely in favor of the salesman and the company. If there is nobody coming on the radio to counter the wild claims and the one-sided rhetoric these guys spout each week, many will come to believe that those are the only products that exist unless you want to “lose all your money in the stock market!” So I started my program to counter some of those arguments and to bring real information to the radio audience. I hope to continue doing this show for a long time to come.