Click below to listen to Episode 127 – Annuities 101: The Good, The Bad, And The Ugly






Annuities 101: The Good, The Bad, And The Ugly

Learn about the pros and cons of annuities.

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Bob and Shawn discuss the pros and cons of an annuity, i.e. the good, the bad, and the ugly. What exactly is an annuity? It is an insurance contract issued and distributed by financial institutions with the intention of paying out invested funds in a fixed income stream in the future. We discuss the types of annuities – variable annuities, fixed annuities, and fixed indexed annuities.

Did you know many annuities don’t require you to be a financial advisor to sell them? This is why it is so important to always go through a fiduciary-based investment advisor when dealing with annuities and other investment products. For example, fixed and fixed indexed annuities are the MOST sold annuities but are NOT regulated by the SEC or FINRA, which can lead to abusive selling practices. This, along with several other issues, may lead to severe complications in the future for investors. There are some good qualities as well, which are also touched upon in this episode, but we want you to get the full story.

HOSTED BY: Bob Barber, CWS^®, CKA^®
CO-HOST: Shawn Peters

Mentioned In This Episode













Christian Financial Advisors



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Bob Barber, CWS^®, CKA^®



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Shawn Peters



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Bible Verses In This Episode






PROVERBS 1:3-7

To receive instruction in wise dealing, in righteousness, justice, and equity; to give prudence to the simple, knowledge and discretion to the youth — Let the wise hear and increase in learning, and the one who understands obtain guidance, to understand a proverb and a saying, the words of the wise and their riddles. The fear of the Lord is the beginning of knowledge; fools despise wisdom and instruction.

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EPISODE TRANSCRIPT

[INTRODUCTION]

Welcome to “Christian Financial Perspectives”, where you’re invited to gain insight, wisdom and knowledge about how Christians integrate their faith, life and finances with a Biblical Worldview. Here’s your host Christian Investment Advisor, Financial Planner, and Coach, Bob Barber.

[EPISODE]

Shawn:

Welcome to another episode of Christian Financial Perspectives. As always, we’re so glad that you are watching or listening, depending on if you’re online or if someone is listening to one of our podcast directories. Anyway, today we have an interesting topic.

Bob:

Right before we started, we were cutting up a lot.

Shawn:

We were a little bit, Yeah. So Bob, have you ever gotten, or for those of you watching listening, have you ever gotten one of those big colorful postcards that have a nice juicy steak on the front?

Bob:

You mean like this?

Shawn:

So you have one with you? Well, funny enough, I also have one with me. Totally not planned.

Bob:

They’re appealing. Look at that. Isn’t that a pretty steak?

Shawn:

Yeah. Mine’s got a slightly different steak, but yeah, they both have this real beautiful steak.

Bob:

Yeah. I opened this up and I’m gonna learn all this stuff like how to reduce my social security taxes and ways to reduce my volatility in the markets and my increase my benefits. Hmm. Looks very educational.

Shawn:

All these great and positives. No negatives whatsoever.

Bob:

Look on the back and I can’t show you the back cuz it’s got the picture of the people that send it out. But right at the very bottom in little bitty print guarantees an insurance annuity products. So that’s how this guy, or they’re sending out, let’s see, about 10,000 of these…

Shawn:

At about a dollar, $1.50 a piece. Let’s say a dollar. So $10,000 just in the printing cost.

Bob:

So now I got $15,000 in this workshop, I’m gonna feed you a free steak. That’s not including the free steak.

Shawn:

That’s not including the actual dinner itself.

Bob:

Another 35 or 50 bucks.

Shawn:

Exactly.

Bob:

Okay. So I get 25 or 30 people there. So each person that’s come has cost me about $400, $500. How am I gonna make up for that?

Shawn:

Hmm. Do you think the annuity commission might be part of it?

Bob:

Yeah. I just gotta sell one or two annuities and I make up for it. So today…

Shawn:

Today “Annuities 101: The Good, The Bad, And The Ugly”. Technically, we could group bad and ugly together, but we just thought it’d be more fun.

Bob:

Well, that’s from, I was a big Clint Eastwood fan with all the spaghetti westerns and I always talk about the good, the bad and the ugly. It’s one of my favorite movies. It’s so funny.

Shawn:

Well, we wanna start today’s episode, though. All fun and joking aside, we wanna start today’s episode with a statement that annuities are not all bad, but they have a tendency to be used to take advantage of investors due to their potential for high, one time commissions. And we are gonna go into a little bit of what is an annuity, the types of annuities, because not all annuities and depending on who’s selling it, necessarily carry a high commission. But that’s just what they tend to be used for.

Bob:

Some carry no commission at all. And we’re gonna go into that. Shawn, when I was developing the program, I said, Shawn, can you think of – we’re Christian Financial Advisors – can you think of a scripture that kind of goes with this. So share the scripture that you came up with.

Shawn:

So we’ve got Proverbs 1:3-7 which says, “To receive instruction and wise dealing in righteousness, justice, and equity. To give prudence to the simple knowledge and discretion to the youth. Let the wise hear and increase in learning. And the one who understands obtain guidance. To understand a proverb and a saying, the words of the wise and the riddles. The fear of the Lord is the beginning of knowledge. Fools despise wisdom and instruction.”

Bob:

Really today is about wisdom. isn’t it?

Shawn:

It is. Just about helping to educate. I mean, it’s really what this entire program is for in the first place is to try to help educate and provide wisdom. The next time you get one of these, you know what to do.

Bob:

And we wanna explain what an annuity is. So let’s go to the definition of what an annuity is. And Garrett, if you’ll put this definition up while I read this. The term annuity refers to an insurance contract issued and distributed by financial institutions with the intention of paying out invested funds in a fixed income stream in the future. Investors invest in or purchase annuities with monthly premiums. It’s what they call premiums. Instead of contributions, it’s called premiums in the insurance world, or lump sum payments.

Shawn:

Okay. So maybe you have a large lump sum that you just put in one time.

Bob:

And I also wanna mention that there are qualified and nonqualified annuities. A qualified annuity will be considered like an IRA.

Shawn:

Right. So there’s a tax advantage to it.

Bob:

Right. And the nonqualified has a tax advantage to it too, but the qualified annuities, you’ve gotta take the money out by 72 because of the RMD rules.

Shawn:

So required minimum distributions for those who aren’t up on their acronyms.

Bob:

Okay. And so there’s basically three types of annuities that you need to know about and be aware of. First one.

Shawn:

Well, let’s go ahead and list all three and then we’ll do a quick definition of each one. So there are variable annuities, there are fixed annuities, and there are fixed indexed annuities. And so the first one we’re gonna cover is variable annuities.

Bob:

And these are very highly regulated by FINRA and the SEC. This is put into…

Shawn:

Because it’s a type of security product. That’s what it’s considered.

Bob:

So it’s really in a different league.

Shawn:

Right.

Bob:

And most of these that you go to…

Shawn:

Are not variables.

Bob:

They’re not variable.

Shawn:

No. They’re typically gonna be a fixed annuity or a fixed index annuity.

Bob:

Typically gonna be fixed index.

Shawn:

Okay. So VAs offer many different types of managed subaccounts to choose from, similar to mutual funds. You kind of think of in a variable annuity, a subaccount, would be very similar to the mutual fund or ETF or the individual stock that you’re holding within an investment account. But in this case they call it subaccounts.

Bob:

And you can’t hold an individual stock in a variable annuity.

Shawn:

Exactly. It depends on the annuity, what specific subaccounts are actually available. So, in that sense, Bob, I think it’s probably more similar, for those watching and listening, it’s probably a little more similar to if you have like a 401K or something at work, it doesn’t mean you can invest in anything. Well, depends on what that plan has available.

Bob:

You’re right.

Shawn:

Depends on what you can actually invest in.

Bob:

But you have a lot of choices. I mean, many of these variable annuities, I’ve seen them with 100 or even 200 choices. So there’s a lot to choose from. Everything from small cap value to large cap growth to international, even sector funds like energy funds, things like that. So you’ve got a lot of choices in these variable annuities.

Shawn:

And then the second one that we had mentioned is fixed annuities. Now these are very simple. Pretty straightforward, but it’s just a fixed interest rate for a certain period of time and they adjust every one to five years.

Bob:

Very much like a CD. A Bank CD. But the CD’s backed up by the bank and the FDIC and the annuities backed up by the annuity insurance company.

Shawn:

So definitely, that’s kind of the important part is making sure that if you did get a fixed annuity, you don’t want the fixed annuity with some, who is this company and are they actually strong?

Bob:

You wanna make sure they’re A rated, a very highly rated company.

Shawn:

Because if they don’t do well, all of a sudden you don’t have anything left.

Bob:

Right. Exactly. And then we have the fixed index annuity.

Shawn:

Number 3.

Bob:

And this is the most sold type of annuity out there.

Shawn:

Specifically, the most abused type of annuity. Because again, really all three of these types of annuities, again, it’s not that they are inherently bad. It’s just in the case we’ll talk a little bit about fixed index annuity, but it’s the way they are used and the way they’re sold, and the fixed index annuity is the one that typically ends up being the most abused because it’s very complicated. Like for most investors, it’s hard to wrap your head around how it actually works. And the people selling it tend to not actually fully explain that. I know we’ll talk about that a little bit later.

Bob:

We’re talking about cap rates. There’s all these cap rates and things like that. So usually in a fixed index annuity, what they’re giving you is, and it says indexed, okay. So they’re giving you a choice to invest in one, two, or three or in maybe even five or six different indexes. Like the S and P 500, the Dow Jones, the NASDAQ Index. International.

Shawn:

Right.

Bob:

The different indexes. Okay. Now the thing about the fixed and the fixed indexed annuity is it doesn’t require a security’s license to sell it.

Shawn:

Unlike the variable annuity.

Bob:

Right. And so you’re not regulated under FINRA and the SEC like you are in a variable annuity that’s so much more highly regulated. And so these fixed and fixed index annuities have very little oversight.

Shawn:

On top of that, too, is the other issue isn’t, again we’ve talked about this before, seeking wise counsel. And so when you are being sold a fixed annuity or fixed index annuity, you might be talking to someone who is a licensed advisor, but most of the time those are sold by an insurance agent. I mean, or they may not say they’re an insurance agent, but that’s really the only thing was they passed an insurance exam to get their license, and that was it. There’s no oversight or regulation from something like FINRA or the SEC.

Bob:

You’re supposed to be by the insurance board, but it’s not a whole lot.

Shawn:

What do they call that? It’s like the wolf watching the sheep.

Bob:

So let’s go into the good side first. Remember, we’re gonna cover the good, the bad, and the ugly. I’m gonna go over the good side and I’m not throwing all annuities out. It’s like don’t throw the baby out with the bath water, they say, right? So there are good sides of annuities and annuities can play a part in an investment portfolio. Not all, but it can play a part. So number one and I like is…

Shawn:

Tax deferral of gains until income is needed. And this is for the nonqualified type of annuity.

Bob:

Yeah. Because when I say that, because a nonqualified, you’ve got to start taking in a qualified annuity. You’ve gotta start taking money out at 72 cause the require minimum distribution rules of IRAs.

Shawn:

But for non-qualified,

Bob:

No, you don’t have to.

Shawn:

If you were anticipating not needing it till 75 or 80, I mean, you can defer if you want.

Bob:

So you can defer all those gains and there’s no taxes doing it. The other good side of an annuity, but there’s costs that come with this is the optional guaranteed income benefit. That is a real plus, especially on variable annuities that are gonna go up and down with the markets depending on what you pick. So in the event of a major market downturn, you’ve got a guaranteed income. And I’m telling you, Shawn, I saw in ’08, a lot of these annuities were sold in ’07, in ’08, and they saved people with their retirement income.

Shawn:

Right. Especially for those who were much closer at that time, were much closer to retirement. Now, if you still had 5 to 10 years left, not as big of a deal when you have a market downturn. But in the case of someone who’s in one of those and they were a year or two from retirement, that can be very helpful to make sure that income stream is protected.

Bob:

And the main thing that you need to know is with these optional guarantees that you can put on one of these annuities, is there are fees involved. So you need to understand the fees and make sure that that’s disclosed to you. So that’s gonna affect your overall returns.

Shawn:

It is.

Bob:

All right. Number three.

Shawn:

Avoids probate at death as long as all beneficiaries are alive.

Bob:

Yeah. That’s important. I mean, if you have an annuity that you took out 15 years ago and you’ve had one of the beneficiaries, maybe three children or your spouse has passed away and that beneficiary, that needs to be updated. Because if that beneficiary is not alive, that part may have to go through probate.

Shawn:

That’s right.

Bob:

And you don’t want to have to do that, but it does avoid probate. Otherwise, you have the proper beneficiaries and they’re all updated and they’re all still alive, completely avoids probate. That’s a really good side of an annuity.

Shawn:

Yeah. And that’s, I guess, your investing 101 or wealth management 101 tip is regardless whether it’s annuity or not, make sure your investment accounts have up to date beneficiaries.

Bob:

All of them. All of them. Okay. Number four.

Shawn:

Can provide some liability protection in certain states.

Bob:

You want me to tell you something funny here?

Shawn:

Sure.

Bob:

You remember OJ?

Shawn:

Yes.

Bob:

Okay. Remember how all the stuff he was involved in? He had annuities in the state of Florida and all his money was protected. Okay.

Shawn:

Okay.

Bob:

So, it can provide liability protection in certain states. Florida and Texas where we are here is a state, so when I say liability protection, it’s very protected from creditors and lawsuits.

Shawn:

Alright.

Bob:

Okay. That’s a big plus.

Shawn:

So something happens, somebody sues you. if the annuity is in one of those states like Texas and Florida, for example, then the annuity assets couldn’t be touched.

Bob:

And I say some liability protection. I’m sure there’s a lawyer out there that’s smart enough that can get through that. So, I’m not gonna make the statement that it’s all protected.

Shawn:

Please consult your legal professional before that. We’re just saying that it can help provide some liability protection, depending on the state and the circumstance.

Bob:

That’s right. Okay. Number five.

Shawn:

Variable annuities can offer literally hundreds of investment choices that can be switched around without concerns of taxes until funds are actually withdrawn.

Bob:

That’s a nice feature, isn’t it?

Shawn:

And that’s true for both qualified and non-qualified annuities.

Bob:

Absolutely. You got it. So as you know, when the markets were way up last year and we took some profits, you gotta pay tax on that. Well, in an annuity, you take that profit, you don’t have to pay tax on it. Now, you do have to eventually. And a thing that’s really important to understand, too, is with annuities, you pay income tax, you don’t pay the favorable long term gain tax. So, the long term gain tax could be much lower. It’s many times much lower than the income tax.

Shawn:

Which is why we said earlier that annuities can play a part, but it’s not necessarily that we recommend that it’s all of your investments are an annuity, for one of those reasons right there.

Bob:

And the sixth good side of annuities is actually there are annuities now that are commission free. How about that?

Shawn:

And surrender free.

Bob:

Completely surrender free. Now these are fee based annuities offered through registered investment advisors. You’re not gonna see, when we were talking about the steak dinner earlier, they’re not gonna sell those kind of annuities. Let me give you an example why, okay? You put a hundred thousand dollars into one of these annuities, many of these fixed index annuities will have a 8-10% commission. So Shawn, you make $8,000 day one.

Shawn:

Wow.

Bob:

Where if you’re charging a fee to manage that of 1% a year.

Shawn:

Which is what we would typically charge, and it’s typical in the industry.

Bob:

It’s typical. That’s $250 in the first quarter for managing it. Okay. You can get $8,000 up front or $250 for a fee to manage it. So, do you see the tendency of greed here?

Shawn:

Yeah. And that’s why look at it in years. For our firm selling an annuity for someone as part of their investment strategy, if it makes sense, we’re gonna earn 1% a year. Well, compared to the free steak dinner, that’s gonna take us 8 to 10 years to make about the same in advisory fees as what that insurance agent made day one.

Bob:

And the insurance agent, many times, gets paid one time up front. So, what motivation do they have for staying with you through those years?

Shawn:

And they usually carry, which we’ll cover, but the surrender penalties, because that 8-10% that was paid, if you decide, oh, this isn’t right for me and you wanna take the money out sooner, well guess what? There’s anywhere from an 8-10%, depending when you pulled it out, penalty because you surrendered it early.

Bob:

So now we’re gonna get to the bad side and the ugly. So we’ve gone over the goods, so now we still have the bad and the ugly. All right.

Shawn:

So number one. Many, but not all, annuities have very high ongoing annual expenses that can be changed to go even higher by the annuity company while you have the annuity.

Bob:

Boy that’s…

Shawn:

Basically changing, moving…

Bob:

I’ve seen this before.

Shawn:

Moving goalpost, like changing the fees after you’ve already gotten into it.

Bob:

After you are in and you can’t get out, they can raise the fees on you. How about that? Let’s get you trapped. Let’s get the handcuffs around you.

Shawn:

That’s fun, right?

Bob:

And then we can go up on the fees. The second thing, participation in the upside of the markets in fixed annuities can be very limited.

Shawn:

Okay. So, that’s interesting. Bob, can you give us an example?

Bob:

An example? I will. Okay. So, let’s say like, we know in the last couple of years, not this year, we know in the last couple years where the S&P 500 has gone up 15-20%. And these fixed index annuities, you got three or four, okay? That’s it. Cause that was the cap rate.

Shawn:

Right. Cause there’s a cap. You participate in the upside of the market up to a certain percentage, right?

Bob:

Right. Okay. Now there’s other annuities that don’t have a cap rate, but guess what their ongoing fee is? It’s like 4% or 5%. So, the annuity goes up, I mean The S&P goes up 15%, you get 10%, they’ve gotten five%.

Shawn:

Right.

Bob:

I mean that is enormous fees. Enormous. Okay.

Shawn:

Okay. So number two. Oh, we just did number two.

Bob:

We kind of covered number two.

Shawn:

We kind of did. Participation in the upside of the markets in fixed index annuities can be very limited.

Bob:

Yeah. We explained that.

Shawn:

So number three, fixed index and variable annuities keep any stock dividends instead of adding them back into your investment.

Bob:

How about that one?

Shawn:

That’s an interesting one.

Bob:

Most people don’t realize that. And the dividends, just even outta the S&P 500 can be, right now with it low, can be 3%. You’re not getting that. The insurance company is getting that instead. So you think about that, just add that fee right there of 3%. Or in a fee based account outside of an annuity, you’re gonna get that.

Shawn:

So it’s that opportunity cost. It’s not necessarily a direct fee, it’s just because of the way they’re structured. So number four, commission based annuities can carry very high surrender penalties depending on the amount of commission paid to the salesperson that can last for many years, locking your money up.

Bob:

Yeah. So there’s kind of a formula here, like you were mentioning. If you have a 10 year surrender penalty on that annuity, pretty much the commission was 8-10%. If you have a five year surrender on that annuity, it was gonna be 4% or 5%, maybe even 6%.

Shawn:

Usually the number of years somewhat corresponds to about one percentage per year of the surrender penalty.

Bob:

That’s correct.

Shawn:

Or the surrender period.

Bob:

Correct. Yeah. So the higher the surrender penalty and fee, the higher the commission. Okay. And remember, fee based annuities have no surrender penalties at all. No surrender penalties.

Shawn:

So really, on those, you move in and six months later you have buyers remorse or whatever, and you can move back out. There’s no huge penalty for doing so.

Bob:

Now if you take out one of these annuities before age 59.5, even if it’s nonqualified and you have gains in it, those gains before 59.5 will be taxed at a regular tax rate if you take it out, plus a 10% penalty.

Shawn:

Gotcha. So, that’s the one other part, I guess to look into is that if you move into one of those and you are under that age, yes you can technically take the money back out, but you want to avoid that potential extra tax and penalty tax.

Bob:

Yeah. Which you’re gonna have to do if you take it out. Okay. So now we’ve had the good, the bad. Now, let’s get to the ugly.

Shawn:

So the ugly side of annuities mostly applies to the fixed and fixed index annuities. So number one, accountability of the industry that seems nearly non-existent with some shady business practices. Now, Bob, can you shed a little light on that?

Bob:

No, that’s all I’m gonna need to say. I think we said it right there. Okay. Number two, there are big incentives to salespeople to even push these certain types of fixed and fixed indexed annuities that are making high commissions. An example. They’ll push, like the company will say, if you sell a lot of this one annuity, we’re gonna give you a free vacation to this exotic getaway, big cash bonuses at the end of the year, and even contests and recognition rallies. I mean, they’re all patting each other on the back and. It’s kind of like – so you see behind the doors the salesman giving each other high fives, “Boy, you got that one!” I mean, that’s sad, but.

Shawn:

So basically, it’s another incident of a conflict of interest?

Bob:

Yes.

Shawn:

Where it’s not just that there’s maybe a commission, but there’s also, Hey, if I sell X amount more to these people, whether it’s a good fit for them or not, then I’m gonna get a cash bonus or I’m gonna get this. I’m gonna win this contest, or I’m gonna get to go on this really great paid vacation. And the problem with that then is that is a conflict of interest on what is best for the investor.

Bob:

And wait till you hear this. They even get – you know how best time to buy a car is like on the last day of the month. Okay. So they’ll even have times…

Shawn:

Well usually, I mean, right now it seems like it’s crazy no matter what time of the month.

Bob:

I know that. But typically, you wanna buy on the last day of the month. And why is that? Cause they get a bonus. They sell a certain amount of cars that month.

Shawn:

By the end of the month.

Bob:

Yeah. They actually have that with annuities. They’ll have like a contest, and it’ll go for this three month period. So can you see as you’re getting towards the end of the three months, I’m nearly here, I’m nearly here, I just need to sell a few more of these. Just gotta sell it, right? Oh isn’t that…

Shawn:

That’s just…but that’s not the way investing and advisors should operate.

Bob:

No, it’s not.

Shawn:

Because that is not fiduciary. That’s not putting the client’s interest first or at least aligning your interest with what’s best for the client.

Bob:

So you covered that third one, which is the conflict of interest. Number four, the manipulative sales tactics, like this right here. This is manipulation, y’all. I’m sorry, but I really believe it. Look at this postcard. It’s not even appealing to the financial side. It’s appealing to the emotional side of big steak dinner.

Shawn:

Well, it’s got this beautiful looking meal. Sure looks fancy. So it’s got this fancy looking steak.

Bob:

Cause I like mine a little bit like that versus other.

Shawn:

And this is supposedly an educational seminar, but what’s the first thing you see? A big juicy steak. And then you open it up, and it’s interesting between the two. This one that I got, it’s got “worried about your nest egg getting crushed”, and it’s got a tank running over a car. So it’s like accommodate, and then yours had a little bit more of like, look at all these great features and benefits and you haven’t even said a word about what is it you’re even talking about? And I’m like, that’s just…that is just wrong.

Bob:

It’s a manipulative sell. And number five of the ugliest, the lack of disclosure that I see of all the costs associated with fixed and fixed index annuities. They’re rarely discussed with the client, all the costs associated with that.

Shawn:

And the requirements. So again, those surrender penalties and the time period, that is usually glossed over as much as possible because if you get all of the details and you realize, wait, if I invest in this, I can only get a maximum of 4% in, say, a fixed index annuity and I’m not participating in the downside, but also I can’t take any of it out for 10 years.

Bob:

Well, you can, but maybe…

Shawn:

Or I lose a percentage of it. But that’s the kind of things that if that was fully disclosed, there’s a lot of investors that might say I don’t think this is the right fit for me. This doesn’t sound as good, though.

Bob:

They go into these things just not knowing, Shawn. This is huge. This one. I wanna tell y’all, and I really wanna look at you in the eye on this one, is the false bonuses that these annuities promise to. I’ve seen them, Shawn, where they’ll say, I’m going to give you a 10% or 15% bonus for putting your money in this annuity. So here’s an example. You put the $100,000 in and I’m now it’s worth $110,000. It’s only on paper. Okay. It’s only on paper. It’s not reality. Tell them to send you the money. Say, I wanna surrender this, so send me my $110,000 that you’re showing me. It’s just strictly on paper.

Shawn:

It’s to make you feel good about having just invested in it.

Bob:

I mean, anybody can type a number on paper, okay? But tell them that I want to put that in my bank account, it’s not going to happen. And that is the ugly side of these bonuses that are supposedly bonuses. They’ll get you in and then the very next year they’ll leave you hanging like, “Yeah, but I’m getting 10% up front.” They’ll do it as an interest. I’m getting 10% interest. Well then the next year, they’re gonna pay you 1% for the next 10 years. Now you divide that out, you’re getting 2% a year. I mean, just look at the math.

Shawn:

So number seven on the ugly, it is common to talk about free withdrawals of your own money in 4% to 6% increments as an interest rate the annuity is paying when it’s not.

Bob:

Isn’t that crazy?

Shawn:

Wow.

Bob:

That’s crazy. So, I’ve seen this over, it’s paying me 4-6%. It’s giving you 4-6% withdrawals of your own money. That’s not the interest it’s paying.

Shawn:

Yeah. It didn’t actually increase the value.

Bob:

Yeah.

Shawn:

So number eight.

Bob:

This is the ugly side. I’m telling you, these are the ugly.

Shawn:

Why don’t you cover this one?

Bob:

Okay. Bait and switch. Annuity companies can change the rules of the annuity contract once you’re in it. How about that? And raising the expenses after you’ve invested all your money, then you can’t get your investment out without huge surrender penalties. There you go.

Shawn:

So, they locked you in. They get you in and then they decide we’re gonna change the game. We’re gonna change the fees. Oh, you don’t like it, you want to take the money out. Okay. Well, there’s a surrender penalty. So no matter what you do, you’re not in a good spot.

Bob:

So there you go. It’s the good, the bad, and the ugly. Okay, I wanna say this, I really do. In conclusion, not all annuities are bad. Okay. They may have a part for some of your investments. And in today’s climate, you do not have to buy an annuity with surrender penalties.

Shawn:

And high commissions.

Bob:

Yeah. Right. There are fee based annuities out there that are available. But I’m telling you, for something like we started with today, that’s gonna cost $15,000 or $20,000 up front, it does not make sense for an advisor to sell fee based annuities. You’d be losing money. But with the high commissions, they can do that. So, be leery of the free steak dinner that you get in the mail. I see ’em all the time.

Shawn:

So, what you wanna do is when you get one of these, you take it and you go stick it in the trash can, and then you’re done.

Bob:

Yeah, that’s right. You got it. So, that’s all for today and I hope we’ve helped you with understanding annuities. There is the good, but there’s also the bad and the ugly. We’re here to help you through all these minefields. You can get ahold of us by phone or text during business hours, www.Christianfinancialadvisors.com on the web, or (830) 609-6986.

Shawn:

Thank you so much for being here. and just remember if something sounds too good to be true, it probably is.

Bob:

Probably is.

Shawn:

God bless you. And until next time.

[CONCLUSION]

That’s all for now.

We invite you to listen to all of our past episodes covering many financial topics from a Christian Perspective. To make sure you don’t miss any of Bob’s upcoming episodes you can subscribe to Christian Financial Perspectives on iTunes, Google Play Music, Spotify, or Stitcher. To learn more about integrating your faith with your finances, visit ciswealth.com or call 830-609-6986.

[DISCLOSURES]

Investment advisory services offered through Christian Investment Advisors Inc dba Christian Financial Advisors, also known as Christian Financial Advisors, a registered investment advisor. Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the host, Bob Barber and his guests. Bob does not provide tax advice and encourages you to seek guidance from a tax professional. While Christian Investment Advisors believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability.