Curious about variable and index annuities? Read Here

“Oh, and I have this annuity that I bought long ago. I don’t know how to get out of it.”

Someone will say that when they’ve asked me to provide a second opinion on how they’ve invested their retirement savings. I can count on it.

Few know exactly what kind of product they’ve bought. Most are disappointed in the return they’ve earned since buying the product. Virtually all shrug their shoulders when it comes to getting out of the investment. The only thing they know for sure is that it will be expensive.

Getting out of an annuity is expensive

If you’ve been approached to buy an annuity of any kind – variable or fixed index are the two most actively sold — I hope you’ll take the time to read some of the columns in the collection of links below.

Writing these columns has brought me lots of hate mail from those who sell annuities. But in all the years these columns cover – more than two decades — not one sales person has showed that I, or any of my sources, was in error.

What sales people say

Instead, the sales folks just made assertions without facts, comparisons or data. One very successful sales operation gave talks in Dallas and Fort Worth, where they told the audience that I had once been “the cooking editor” so nothing I wrote was accurate. (Full disclosure: I like to cook but I have never been a cooking editor. My first book on personal finance was published in 1972, one year before the first Certified Financial Planner certificate was awarded.)

The reality here is that most annuity products are so burdened with marketing, sales and other expenses that they won’t do what they are supposed to do.

Annuities are a problem for Texas teachers

That’s particularly true here in Texas for the variable annuities offered in the 403(b) plans available to Texas teachers. They typically have expenses that are twice as large, or greater, than the all-in costs of most 401(k) plans.

And those expenses, in turn, are massively larger than the costs you’ll incur by investing in the Couch Potato way that I have advocated for decades.

The Texas legislature has just lifted the maximum allowed level of expense on 403(b) products from its generous 2.75 percent a year to whatever the marketers can get away with.

Fortunately, the rest of the investing world is very different.  Today, anyone with an IRA, Roth IRA or regular taxable account can invest for his or her future at an annual cost of 0.05 percent, possibly less.

That’s a big, big difference. Enough to drive your retirement through.

 You can learn about that here:

An alternative to 403(b) plans for Texas Teachers, 09/14/2019 https://scottburns.com/an-alternative-to-403b-plans-for-texas-teachers/

And you can measure the impact of fees on retirement accumulations here:

Whose retirement money is it, anyway? 09/20/2019 https://scottburns.com/whose-retirement-money-is-it-anyway/

   And find an online calculator here:

To see exactly how much expenses can impact your future, use my calculator in  on the Dallas Morning News website in this column: https://www.dallasnews.com/business/personal-finance/2019/09/15/new-texas-bill-means-teachers-could-be-better-off-saving-in-a-roth-ira-than-a-403-b-plan/ 

To read more, visit the links below.

Columns reporting and measuring annuity performance over two decades  

Variable Annuities, R.I.P. , 08/17/1997      https://scottburns.com/reality-testing-another-nail-in-the-variable-annuity-coffin/

Variable Annuities wiped out by index fund, 02/02/1999 https://assetbuilder.com/knowledge-center/articles/variable-annuities-wiped-out-by-index-fund

Long term, retirement plan investment costs are very important, 03/02/2000   https://scottburns.com/long-term-retirement-plan-costs-are-very-important/

Can variable annuities beat an index fund? No. 06/03/2001 https://scottburns.com/can-variable-annuities-beat-an-index-fund-no/

Variable annuities vs. an inexpensive index fund, 09/10/2002   https://scottburns.com/variable-annuities-vs-inexpensive-index-fund/

Dis-informing the public, 07/23/2002   https://scottburns.com/dis-informing-the-public/

Variable annuities that beat taxable funds, 02/25/2003   https://scottburns.com/variable-annuities-that-beat-taxable-funds/

The disadvantage of Variable Annuities, in dollars., 08/19/2003     https://scottburns.com/the-disadvantage-of-variable-annuities-in-dollars/

Variable Annuity Watch, continued, 10/10/2004  https://scottburns.com/variable-annuity-watch-continued/

Seven reasons to avoid variable annuities, 06/21/2005     https://scottburns.com/seven-reasons-to-avoid-variable-annuities/

Variable Annuity Watch 2005, 06/19/2005   https://scottburns.com/quixote-returns-variable-annuity-watch/

Answering the Variable Annuity Industry, 07/12/2005   https://scottburns.com/answering-the-variable-annuity-industry/

How to exit a variable annuity, 08/01/2006   https://scottburns.com/how-to-exit-a-variable-annuity/

Variable Annuity Watch 2007, 07/19/2007  https://scottburns.com/variable-annuity-watch-2007/ 

Variable Annuity Watch 2008, 08/22/2008   https://scottburns.com/variable-annuity-watch-2008/

Variable Annuity Watch 2009, 09/04/2009   https://scottburns.com/variable-annuity-watch-2009/

Variable Annuity Watch: they lose, again, 09/10/2010   https://scottburns.com/variable-annuity-watch-they-lose-again/

Variable Annuity Watch 2012, 03/08/2013   https://scottburns.com/variable-annuity-watch-2012/

When fees cost more than taxes, 09/19/2014   https://scottburns.com/when-fees-cost-more-than-taxes/

 Columns about Equity-Index/Fixed Index annuities

Equity-Indexed Annuities: long on sizzle, short on steak, 04/14/2007 https://assetbuilder.com/knowledge-center/articles/equity-indexed-annuities-long-on-sizzle-short-on-steak

Sales commissions versus reality, 06/03/2007   https://scottburns.com/sales-commissions-versus-reality/

Equity-Indexed Annuities, ‘Fugetaboutit’, 07/06/2010 https://assetbuilder.com/knowledge-center/articles/equity-indexed-annuities-fugetaboutit


This information is distributed for education purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service.


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(c) Scott Burns, 2019