It's a shame that Pam's mother didn't call Bob Brinker's Moneytalk and ask him about annuities before making this decision based on what sounds like a cold call to her home:
Subject: Question_From_Honeys_Bob_Brinker_Beehive_Blog_Reader Date: 12:14:34 -0700 From: Pam firstname.lastname@example.org> To: email@example.com
I am not sure if this is the correct place to address this question. I have been listening to Bob Brinker for some time but have never had a reason to call in the show. However, recently, as early as yesterday, I received a phone call from my 72 year old mother that she was approached by someone other than her financial advisor to take, move, $300,000 into an Annuity account with Aviva. It is a LifetimePay Plus Version account promising 6% initial return.
I understand that Aviva is rated A but I am very concerned about this move. She has already signed the papers and 2 out of the 3 money transfers from her accounts have been made. Should we be concerned?
Thank you for your time,
Honey's return email to Pam:
Firstly, let me state that I am not a financial adviser nor a lawyer, but if this was my mother, I would be concerned for several reasons.
I would want to know if an annuity is the best way for your mother to invest her money based on her overall financial situation -- such as what portion of her net worth is the $300,000.
The fact that they contacted your mother rather than her contacting them, tells me that there is a commission involved. I would want to know how much it was.
I would also want to know what the ongoing costs are and what kind of penalties would be assessed in case your mother should change her mind and want to get out of it.
You say that this "lifetime" annuity pays 6% "initial return." That tells me it is a "variable annuity," so I would certainly want to know how long that amount will be paid and what the ongoing returns will be.
Six percent is a very large amount to guarantee someone these days, even for the short-run. Treasury yields are minuscule and even the 30-year Bond is yielding only 4.0%. And there are no guarantees in the stock market.
Perhaps she should talk to her own financial adviser and find out what he thinks about annuities in general and this one in particular. Perhaps he has some prior experience with Aviva. I have never heard of it until now.
Since you have been listening to Bob Brinker, you are probably aware that he is no fan of annuities. The only company that he recommends for people who are determined to buy annuities against his advice is Vanguard. Here is a link to annuity information at Vanguard.com.
I searched back through some of my Moneytalk Summaries for Brinker's comments about annuities. Here are a few words of caution:
- Bob Brinker Tidbits of Advice:
- Buying FDIC Certificates of Deposit is not the same as buying Annuities. When bankers tell customers that they are both guaranteed, that is “bull-bleep.” Annuity guarantees are not the same as FDIC guarantees.
- ANNUITIES.....Brinker is totally against buying annuities. He says that a high percentage are inappropriately purchased, have high expenses and surrender charges -- the Vanguard annuity program is the one exception.