Beware of High Yielding Annuities

[Liz]

Do you think his analysis is accurate? The writer is claiming that buyers should beware of a 2.5 fixed interest rate on tax deferred annuities from Professional Life and Casualty.

Beware of High Yielding Annuities - The Smarter Investor (usnews.com)

 

[DHK]

The writer is saying that "if it sounds too good to be true" then you need to "find the cloud in the silver lining."

Lack of published financial ratings is a problem. Ratings isn't everything, but NO published ratings is a red flag.

It can also be a problem for agents depending on your E&O coverage.

First, will it cover sales of company products with ratings below an A- rating?

Second, could that sale come back to bite you?

 

[Indy007]

I wouldn't exactly call 2.5% "high yielding". Not bad for the interest environment were in though. As for Professional Life and Casualty, I've never heard of them. Their website is terrible, and the last time A.M. Best rated them, it was not somewhere I'd recommend.

With that said, I think the author was wrong saying to beware of companies paying decent interest, because they must be making risky investments. I would instead look at the financial strength, ratings, history and longevity of the company paying that "high yielding rate"

 

[scagnt83]

Anytime a person makes a blanket statement as strongly worded as this article did. That person will most always be right just some of the time.

The article wasn't as bad as the headline sounded.
Pay attention to Ratings= Good advice
And that was really the highlight of this article. It was an example of why consumers should ask about a companies financial ratings and understand what they mean. And obviously if a company is not rated or has been dropped, that is a bad sign.


My problem with the article is that he accomplishes this by creating drama through a sensationalized headline.

Also, the article seems biased when you consider that there are comparable rates offered by B & A and higher rated companies.

The author gave no mention of the surrender period. And the longer you go the higher rate you get.
But there is a B+++ rated company that currently offers 2% on a 3 year product.

If he was truly interested in educating people about this subject, why not explain that not all annuities offering these yields are bad? Unless education was not the main goal of the article...

 

[VolAgent]

If he was truly interested in educating people about this subject, why not explain that not all annuities offering these yields are bad? Unless education was not the main goal of the article...

It was published by a publication focused on mutual funds. What do you think the goal was?

 

[scagnt83]

It was published by a publication focused on mutual funds. What do you think the goal was?

Oh I know! The blanket statement headline says it all.


Also, this guy says that you should make no transaction based decisions.

I do agree that you need an overall plan. But to say that you need to lay out a financial plan just because you want a higher rate on a CD or savings account, is a bit much.

He also neglects to mention that the financial plan he suggests will cost that person a couple thousand dollars... all because you wanted 2% instead of 1%?

Of course he is also a CFP who does fee based planning...

 

[VolAgent]

Of course he is also a CFP who does fee based planning...

And we all know that fee based CFPs are completely unbiased and are of a higher ethical standard.

 

[scagnt83]

And we all know that fee based CFPs are completely unbiased and are of a higher ethical standard.

And they never sell commissionable products and take a fee at the same time either