We would love to hear from you. Click on the ‘Contact Us’ link to the right and choose your favorite way to reach-out!

wscdsdc

media/speaking contact

Jamie Johnson

business contact

Victoria Peterson

Contact Us

855.ask.wink

Close [x]
pattern

Industry News

Categories

  • Industry Articles (21,131)
  • Industry Conferences (2)
  • Industry Job Openings (35)
  • Moore on the Market (413)
  • Negative Media (144)
  • Positive Media (73)
  • Sheryl's Articles (799)
  • Wink's Articles (352)
  • Wink's Inside Story (273)
  • Wink's Press Releases (123)
  • Blog Archives

  • March 2024
  • February 2024
  • January 2024
  • December 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • August 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • November 2008
  • September 2008
  • May 2008
  • February 2008
  • August 2006
  • Response: Fixed Deferred Annuities: CDs With Gotchas

    July 23, 2010 by Sheryl J. Moore

    PDF for Setting It Straight with Mel Lindauer

    ORIGINAL ARTICLE CAN BE FOUND AT: Fixed Deferred Annuities: CDs With Gotchas

     Dear Forbes Editor,

    I recently had the occasion to read an article on your website, which is very misleading and inaccurate. “Fixed Deferred Annuities: CDs with Gotchas,” by Mel Lindauer reflects poorly on Forbes because of the misinformation in the article. I am contacting you, as an expert in the insurance field, to ensure that you can make appropriate corrections to this article and have a reliable source for fact-checking in the future. I would have copied Mr. Lindauer on this correction, had I access to his email address.

    I am an independent market research analyst who specializes in the fixed and indexed annuity and life markets. I have tracked the companies, products, marketing, and sales of these products for over a decade. I used to provide similar services for variable products, but I believe so strongly in the value proposition of indexed products that I started my own company focusing on IAs and IUL exclusively. I do not endorse any company or financial product, and millions look to us for accurate, unbiased information on the insurance market. In fact, we are the firm that regulators look to, and work with, when needing assistance with these products.

    It is so important to note that it is absolutely disingenuous to compare certificates of deposit (CDs) to deferred annuities in the manner that Mr. Lindauer did. An annuity provides for tax deferral where a CD cannot. Further, annuities are the only retirement income product that can provide a guaranteed income that the purchaser cannot outlive; this is a value proposition that CDs simply cannot offer.

    In addition, fixed deferred annuities do not have “lots of fine print ‘gotchas’.” The National Association of Insurance Commissioners (NAIC) has strict regulations on product design, disclosure, marketing, and even the font size of communications that made to purchasers! In light of this, I think you’ll see that it is quite impossible to have fine print or “gotchas” in this market.

    Not all fixed deferred annuities offer interest bonuses or premium bonuses either. Usually bonuses are optional on these products. When a product with a bonus is purchased, the terms and guarantee periods are prominently displayed to the annuity purchaser. Therefore, someone may purchase a product with a higher rate in the first year, but it is clear that the rate will decline in years two plus. This is common knowledge, clearly communicated, and prominently disclosed- for Mr. Lindauer to turn this around and present it as a negative feature on annuities is preposterous.

    Annuity purchasers are never “locked into” their purchases. There are deferred annuities with surrender charges as short as one year. In addition, these annuities permit penalty-free withdrawals of 10% of the annuity’s value annually. Some even allow as much as 50% of the annuity’s value to be withdrawn in a single year. Moreover, 9 out of 10 annuities provide a waiver of the surrender charges, should the annuitant need access to their money in events such as nursing home confinement, terminal illness, disability, and even unemployment. Couple this with the fact these products pay the full account value to the beneficiary upon death, and I think that you’ll see that consumers have tremendous access to their cash value when they purchase deferred annuities. These are some of the most liquid retirement income products available today! If purchasers are concerned about having full liquidity for purposes of interest rate risk, laddering annuities works just as well as it does with CDs.

    Mr. Lindauer claims that deferred annuities are “low-yielding” in comparison to CDs. I find this laughable considering that the current average fixed annuity rate is 3.70% and the CD rates are averaging 1.14% (according to bankrate.com). In addition, indexed annuities currently offer purchasers the ability to earn gains as high as 8.70% annually today. Certainly, annuities were offering more appealing rates at the turn of the century, when you could purchase them with double-digit yields. However, this is a different interest rate environment than where the market was a decade ago. That being said, I think that deferred annuities can provide a comparably attractive rate as compared to CDs.

    While it is true that fixed and indexed annuities are not “guaranteed by the Federal Deposit Insurance Corp,” they are backed by the claims-paying ability of the issuing insurance company AND guaranteed by the National Organization of Life & Health Insurance Guaranty Associations (for more information, see www.nolhga.com). What is more, some states’ coverage limits under NOLHGA are higher than that provided by the FDIC. That being said, it is deceitful to present this information in a manner that suggests that annuities are not guaranteed.

    Perhaps the funniest statement made in this piece was that fixed annuities have “no prospectus.” (And it was made in a negative tone!) Considering that the average prospectus is more than 200 pages long and the average fixed/indexed annuity contract is 26.7 pages long, I’d suggest that not having a prospectus is a PLUS for fixed and indexed annuities. Couple this with the fact that the marketing materials and plain-language disclosures that are provided to the prospective purchaser, along with the annuity contract, provide a clear overview of the product that they are purchasing (in laymen’s terms), and I think that you’ll agree that fixed and indexed annuities are far less difficult to understand than variable annuities (which are sold with a prospectus).

    Most importantly, indexed annuities have not been referred to as “equity indexed annuities” or “EIAs” since the late 1990’s. The insurance industry has been careful to enforce a standard of referring to the products as merely “indexed annuities” or “fixed indexed annuities,” so as not to confuse consumers. This industry wants to make a clear distinction between these fixed insurance products and equity investments. It is the safety and guarantees of these products which appeal to consumers, particularly during times of market downturns and volatility. Your help in avoiding any such confusion is so greatly appreciated, as would be Mr. Lindauer’s.

    FYI- the Securities and Exchange Commission (SEC) failed in their attempt to regulate indexed annuities as securities. The D.C. U.S. Court of Appeals vacated the SEC’s Rule 151A, thus reiterating that indexed annuities are fixed insurance. Furthermore, the recent Dodd-Frank financial regulatory reform act ensured that indexed insurance products will continue to be regulated by state insurance divisions indefinitely, as opposed to the SEC.

    Considering that most fixed annuities credit a minimum of 1% -2% annually, and have the potential for much greater gains (especially with indexed annuities), I’d say that it is a very attractive option compared to CDs which are taxable and currently yielding just over 1%. Compare that to the tax-deferral on products averaging nearly 4% and it seems like a no-brainer to me.

    Should you have a need for factual information on annuities in the future, please do not hesitate to contact my firm. It appears that it would behoove Mr. Lindauer to follow suit.

    Thanks.

    Sheryl J. Moore

    President and CEO

    AnnuitySpecs.com

    LifeSpecs.com

    IndexedAnnuityNerd.com

    Advantage Group Associates, Inc.

    (515) 262-2623 office

    (515) 313-5799 cell

    (515) 266-4689 fax

    Originally Posted on July 23, 2010 by Sheryl J. Moore.

    Categories: Negative Media
    currency