Title: Annuities Date: 10/1/04 Clients often bring their annuity papers to me for review. Invariably, they neither fully understand the product nor the contract. Usually, I do not fully comprehend them either. Though better than they used to be, they are still too dense for anyone without a specialty in contract law. The fees are especially difficult to find on the document and the commission paid to the sales person is NEVER stated. And the chief offender of this obfuscation is the variable annuity. Some insurance products are prudent additions to a portfolio. Fixed annuities can provide guaranteed income for retirement or for handicapped children for example. However, variable annuities are almost always the wrong choice for investors. Their only advantage is tax deferral, but qualified plans are usually much cheaper plus they offer a greater variety of investment choices. So before you ever purchase an annuity consult a knowledgeable third party even if you have to pay for the advice. Fees do vary by company as do investment choices and options. It can certainly save you in the long run to perform your due diligence for any insurance product. Alright when does a fixed annuity make sense? If you are facing retirement with no other or very little guaranteed income then a steady income stream that is not dependent on the vagaries of the equity or bond market makes sense. Remember though Social Security is basically an annuity. So is a pension if you are lucky enough to have one. So if you have both, skip the fixed annuity and place you money elsewhere. Many financial writers, such as Jane Bryant Quinn, have already taken up this crusade chastising the insurance companies for misselling this vehicle. It is about time that investors, especially seniors, are warned about the variable annuities and steered away from them. Retirement leaves very little room for investment errors except for the extremely wealthy. 20 year olds can and should take risks with their money, retirees should not. Marty Gallagher <- Back Home