Saving for one’s own retirement is something everyone needs to consider. There are many financial vehicles that can be used when traveling along the road to retirement. One of these financial vehicles is an annuity. However, annuities are often not suitable for consumers, especially more elderly consumers, because of excessive “hidden” fees and large surrender charges that apply when annuities are surrendered/terminated before a certain time. This is due in part to large commissions paid to agents who sell them, who often act in their own best interest, rather than in the interest of consumers. John Waggoner of USA Today provides some sound advice in his recent article entitled “Annuities are a Retirement Option, But Be Wary of Fees:”
In an article posted on this blog in September entitled, “New California Law Requires That Insurers and Agents Verify that an Annuity is Suitable for the Consumer,” McKennon Law Group PC explained that California Governor Jerry Brown recently signed a new law that provided increased protection to seniors and other consumers who are interested in purchasing an annuity. AB 689, which was sponsored by the California Department of Insurance and authored by Assembly Budget Committee Chair Bob Blumenfield (D-San Fernando Valley), requires that insurers verify that an annuity purchase is suitable and appropriate for the consumer based on an evaluation of his or her age, income, financial objectives and ten other factors.
Knowing the fundamental basics about how an annuity works, the options available and the pitfalls is essential in understanding whether an annuity should be purchased.