Why Annuities Stink

Clark doesn't curse on the podcast but he considers "annuities" to be one of the worst words you can use. You can't miss Clark's opinion.

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[benefieldtabbinsurance]

You can get a 5 year myga(multi year guaranteed annuity) that pays better interest than a cd - do your own due diligence - never take any one opinion as truth.

[ph]

But thats just one type of annuities. There are MYGAs which function similarly to CDs. Annuities are contracts with an insurance company. There are manny different ways to set up the contracts. Myself, I don't like the Fixed-Index type because typically the insurance company can change the terms after the 1st year. I don't like any Variable types. SPIA (Single Premium Immediate Annuities) and DIA (Deferred Income Annuities) are usually relatively straight-forward, they pay out a fixed amount every month, for a term of years or life, with options for spouse and at death. I had a MYGA throughout he time when both bond and stock markets tanked, and it was nice to still see the positive every business day from the MYGA...Now, nothing is perfect, and it is a contract, so be sure you understand it.

[shawn]

Even a good guy gets it wrong every now and then.

[financialsuccesscoach]

Clark, I'm so embarrassed for you bro, you are better than this. You clearly don't know what you are talking about when it comes to annuities and especially when you switch to talking about life insurance plan compensation when you are supposed to be talking about annuity compensation. This is Wall Street rhetoric and it is garbage. Retirement Income research has proven that portfolios with annuities reduce volatility and increase income. Do yourself and your audience a favor and update your knowledge base and understanding.

[barrystover]

People so misunderstand annuities. Income annuities have no fees...it is a spread product. The ins co wins if you die too soon but those who live make out like bandits! A 70 yr old can buy one and get a 7.5% payout for life. Variable annuities have fees and may not be right for many. If a person does not have a pension, an income (immediate) annuity may make perfect sense....if they need monthly income. If no income is needed invest your money for growth. You can not outlive an annuity and the longer you live the more % you make. Policemen, firemen, school teachers all have income annuities (that is what their pension is). Social security is an income annuity. You never worry about stock mkt fluctuations and you get a check for life. Most of us like our social security checks and will love another guaranteed income stream. Saying annuities are bad is like saying bond funds are bad because they pay so little nowadays. It depends upon the need.

[griffinreitz]

Annuities are a tool. Just like everything else. Neither good or bad, if you need them, and use them correctly. The older you get the less exposer you want to the market. At my age I'm perfectly happy with fixed income at 5 and 6% and no market exposer.

[BricksVideo]

An annuity worked perfect for my situation. I do not have a work pension. I had 2 IRA's so I turned one into an Annuity that has grown since 2018. I will be getting $19K per year for life. When I turn 78 I will have used up what I contributed initially, but still be getting my payments. With my SSA money and this annuity I will not need to touch my other IRA until RMD's. So I believe it can work for some people.

[guzzi]

My annuity increased almost 15, 000 dollars last year.. I would not of made that in the Equity, Bonds, etc. with this money...

[markehesse]

there are many, many types of annuities...not just fixed index annuities...normal single premium immediate & deferred annuities are good for some...I also do not like fixed index annuities

[rudged]

I've been a big fan of Clark Howard until now. Beware of anyone who slams an entire line of products without any attention to the diversity among them. A single premium immediate annuity or a delayed income annuity has none of the problems mentioned here. They are used for guaranteed income, not growth. They are pensions you buy with your own money. Don't like annuities? Then call the US government and tell them you don't want your social security payments. Social Security is a an annuity, and if fact the best one on the planet when you consider it is adjusted for inflation and is backed by the U.S. government.

[jet]

There are 20 year annuity's that will pay more than you put in to your heirs if you die early. not sure where he gets a lot of his information. Fidelity shows what I just said with their products. also, hard to know how you get ripped off in a SPIA or QLAQ;, since it is a contract and everything you put in and will get out is outlined on the paper you sign. There are plenty of annuities that do NOT do what he is saying

[markclaypool]

Brutal commissions? Are you serious? Clients make a lot more than the financial professional. IUL is way better than whole life. FIA’s are a wonderful tool if used correctly.

[larrythemoneyguy]

ive seen so many people who have benefited from annuities. Each person situation is different. Some may require one and some don't depends on a persons situation.

[johngerard]

There is nothing wrong with getting a simple immediate annuity not tied to the stock market. I know many people who purchased one and are quite happy. I am NOT talking about indexed annuitities or variable annuities. You buy an annuity for what it contractually guarantees to pay out each month not what it MAY do if the market does such and such. Never use more than 25% of your assets to buy one IMO unless you have no heirs.

[richard]

There are no surrender charges. They are deferred sales commissions that you pay each year until you have paid the full deferred sales commission. The so called surrender charge "goes away" as you pay it. Getting out and paying the balance of the deferred commission is your best move if you are going to a better investment option like a no load investment such as an S&P 500 ETF.

[JoeC]

question on surrendering non-qualified annuity... if there is no growth in first 2 years, if annuity is surrendered with original money (minus surrender charges), will there be IRS penalty for cancelling annuity (less than 59.5yrs).?. Since there is no growth, I feel no IRS penalty. Right?.

Ex: Invested 100K money 2 years back with non-qualified money (like savings account). No growth yet. Surrendering contract will give 100K -6K = ~94K. No IRS penalty in this case. Right?

[chuckgilbert]

Diversify, diversify, diversify! I have money in stocks, bonds and annuities. I sleep at night knowing I have some guaranteed income for the rest of my life, regardless of how the stock market does. The closer you get to retirement, the more you think along those lines. The annuity I have is like a pension, but I never worked for one company long enough to get a pension. But yes still continue to grow some of your money in the stock market as well.

[ianmcgaughey]

Commissions on annuities are only paid once and they're pretty low, 3-6% on average. If you get into an annuity make sure it's a good annuity and make sure you have the money to spare. A term variable or indexed annuity is going to make more money than a CD right now with similar surrender charges

[jennellrogers]

Are there commissions on immediate annuities

[rickkaiser]

Last time stocks and bonds were returns were negative was back in 1969 not 130 years ago