Investors can buy an insurance policy on their investments. The policy can guarantee* a certain interest rate. Or, it can guarantee no loss of principal. Interest and growth are typically tax-deferred. For investors who want to participate in the stock market’s growth potential, the policy can guarantee a positive growth rate even when the stock market crashes.
These policies are better known as “annuities” and are often complicated and expensive. Based on our experience, many investors purchase annuities without fully understanding the terms. AnnuityDiscovery.com serves investors by revealing annuity terms often lost in the fine print. It is a complimentary service without obligation that can help people avoid disappointment, extraordinary expense or worse.
Consider this: Many annuities offer an income rider. “Rider” is insurance jargon for a policy addendum with a fee. And by “income,” the insurance company means it guarantees an interest or growth rate to pay your money back to you.
Imagine an investor who commits $100,000 to an annuity with a 5% income rider. Then, the market endures a steep three-year decline like what happened when the dot-com bubble burst at the turn of the century. Meanwhile, the income rider gains 5% per year compounded annually.
The investor, who now wants to liquidate the annuity to help buy a vacation home, examines the annuity statement. The guaranteed income rider account value equals $115,763. So the annuity owner calls the salesperson asking for a $115,763 check.
This story does not end well. The salesperson explains that the income rider value is not cash. It is only available if the investor 1) takes annual payments over the next 20 years and 2) agrees to hand over the remaining investment value to the insurance company**. You can imagine the investor’s surprise and disappointment.
It’s not that the salesperson necessarily failed to disclose policy terms. It’s all legal. AnnuityDiscovery.com helps to disclose the important terms by making a three-way call with the investor to the insurance company. AnnuityDiscovery.com asks the questions few investors would know to ask. Maybe even the salespeople wouldn’t know to ask or want to ask for that matter.
Consider what actually happened in an AnnuityDiscovery.com three-way call about annuity expenses. Ryan Litfin asks the insurance rep about the mortality and expense (M&E) charge. With the annuity owner listening in, the insurance rep replies, “The total charge is 1.7%.” (1.7% means 1.7% of investment value). But, “total” only applies to the M&E charge. M&E is just one of the expense categories annuities impose.
Ryan’s follow-up questions seek expense rates associated with other expense categories. It turns out; the true total expense equals 3.55%. Then, Ryan asks a question that reveals the impact of the true total expense: The insurance rep, after a pause, concedes that just to break even, the investment must earn 3.55%. And if the investment loses 1%, its value would drop 4.55%!
In our view, telling the truth is a revolutionary act in a world of universal deceit. We seek the truth. When prospective or current annuity owners use AnnuityDiscovery.com, Ryan asks only a few questions. But the questions get to the heart of the annuity terms. He uses everyday words to ask questions most people wouldn’t know to ask. The conversation is non-confrontational; the insurance reps are obligated to do the right thing: To answer questions about their annuities truthfully.
If you, a friend, or a family member owns or is considering the purchase of an annuity, please consider using AnnuityDiscovery.com. It’s a complimentary service. And with the facts, we believe you’ll be in a better position to make good decisions.
*Insurance companies back annuity guarantees with their claims-paying ability. If the insurance company becomes insolvent, it might not satisfy claims on the guarantees.
**Not all annuities have exactly these terms, but these terms are very common.
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