Seniors Retirement Savings were burned into an equity-indexed Annuity. Are financial professionals able to change an equity-indexed annuity to make it safer for senior retirement savings? Is it possible to change or index an elderly’s unstable annuity foundation on an equity basis if stability is not available?
For insurance companies looking to increase their share of total assets relative to their competition, equity-indexed annuity sales seem like the ideal solution. While financial representatives receive high-paying commissions, the insurers have a healthy profitability margin. It was easy to convince consumers, particularly the elderly and wealthy, that their retirement savings could rise. The past performance history has shown that saving stability and higher returns have been achieved than with other investment options. Seniors fell for the lure, financial representatives made a lot of money, and insurance companies enjoyed the rewards. Seniors were not aware of the devastating economic consequences of giving up all or part their EIA policies.
EIA (equity-indexed annuity) is similar to a mix of features from fixed and variable annuities. Fixed annuities pay a guaranteed interest rate. Fixed annuities are similar to bank deposits certificates, which many seniors used to save their retirement savings. Fixed annuities can offer higher rates and more attractive riders than plain CDs. Variable annuities are sub-accounts. This is similar to selecting mutual fund portfolios that you want to invest in.
Equity-indexed annuities offer the best of both fixed and variable features, and allow you to accumulate retirement savings and receive monthly income from the accumulated value. The participant receives a minimum interest rate and a share in the stock exchange, which tends increase in value. It is now possible to earn stock market returns without taking on any risks. It was almost sold by some insurance companies until recently.
A financial representative may earn as much as 10% commissions when they find someone to invest. A $50,000 face value annuity could earn you $5,000 commissions. Over 120 billion dollars was invested in indexed annuities before the economic downturn. Many of these annuities were sold to seniors, who are often not the best buyers if they want retirement stability. The combination of the massive stock market crash, high initial fees and high surrender costs EIA has caused equity-indexed annuity product to severely burn the wealth and seniors.
WHAT SHOULD A FINANCIAL REPRESENTATIVE DO? Talk to senior citizens who have an EIA and ask them about their feelings. Is it possible to get out of the EIA despite the surrender fees? It is unlikely that the potential client feels secure and will not be asked to take on more risks. The potential client is likely to have already left the company if the equity-indexed annuity was offered to them by an inexperienced financial/insurance representative. An immediate annuity that is also recognized as a lifetime income annuity may be a solution. An EIA chance is not as reliable as a guaranteed income. This opportunity is causing too many semi-wealthy people to struggle to adjust to a middle income lifestyle.
Annuity salespeople with experience, honesty and trust-building qualities should view this economic crisis as an opportunity to gain clients and build a strong reputation. Both agents who are trainees to financial fraudsters are losing clients that they shouldn’t have. These fraudsters are being kicked out of the office permanently. This is just punishment for them and their insurance company for exploiting so many seniors and turning the wealth of many people’s retirement savings and assets into a terrible nightmare.