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Posted: 6:00 a.m. Wednesday, June 26, 2013

Annuities get even worse!

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By Clark Howard

ClarkHoward.com


A new wrinkle in the world of annuities could have a direct impact on your level of comfort in retirement.

Here's the scoop: During a recent marketshare war, insurers started writing annuities with extremely generous lifetime guarantees in order to capture more business. This took place principally in the 1990s.

Now it turns out that the benefits being offered at that time were too generous. Moody's reports many insurers are at great financial risk because they overpromised on these lifetime benefits.

A new update from The Wall Street Journal  says several insurers are now trying to change the terms and conditions on customers in the middle of the game. They're facing exposure for billions of dollars if they have to pay out the benefits as promised.

So what are they doing exactly? They're sending mailers pushing a one-time bonus if you accept new terms and conditions. In taking the one-time bonus, you lose that lifetime benefit that is so valuable to you.

The Hartford is going further than that. They're saying to their annuity holders that if you don't go into investments that will reduce what you're going to earn, they will unilaterally take away your lifetime benefit!

Talk about a game of dirty pool.

The reality is the insurance industry put itself in this bind when they got into the marketshare war and took a rip-off product and made it too generous.

If you have an annuity and you get an innocuous letter offering a bonus option, you can't make the decision on your own. These insurance contracts so complicated that you need expert advice. This is big money at stake in your own life.

I recommend you start with the insurance agent who sold it to you originally. If you have a sense they're sending you down a bad path, hire a fee-only financial planner to evaluate your existing contract.

Don't be cheap on getting the right advice now. This could affect your level of comfort in retirement.

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