Say “No” to Annuity Buybacks

If you have older annuities, you may have been offered a financial incentive in exchange your guaranteed income and death benefits. Don’t take the bait. Say “no” to annuity buybacks.

Understanding motivation is the key to understanding behavior. Say “no” to annuity buybacks.

Say “no” to annuity buybacks

Understanding motivation is key to understanding behavior. When you understand why a company is offering to buy back your lucrative annuity, you’ll understand why it’s probably a bad idea for you to take the offer.

Companies sold deferred variable annuities with generous guarantees in the late 1990s and early 2000s, when the stock market was rising and interest rates were higher. With their investments still battered by the 2008 market downturn, insurers are now looking to shed these guarantees from their books.

By offering you an apparently large payment, companies can avoid paying you more over time.

Many of these older annuities base lifetime payouts and death benefits on the investor’s original investment plus annual returns of 5% and 6%—no matter what happens in the stock market. Several companies recently began offering annuity holders one-time payments to give up those guarantees, and other insurers are planning to do the same.

Rick Rodgers, a financial planner in Lancaster, Pa., says such annual returns are “difficult if not impossible to replicate in today’s low-interest-rate environment without taking risk.” If you expect to live at least 15 years, he says, the insurers’ offers “aren’t going to make up for the security the guaranteed contract offers.”

Rest assured that everybody’s out to make a buck, and if they can do it at your expense, they will. Just say “no” to annuity buybacks.

Click here to read more about why you should say “no” to annuity buybacks.

Leave a Reply

Recent Comments