Understanding Annuities: Is Your Annuity a Scam or Just Complex?

Complaints about life insurance investments and annuities are on the rise. For many the problem is simple: Nothing about the language in the annuity contract is simple.

The whole business of annuities can be confusing to those who buy them — especially for senior citizens, who are often targeted for these types of retirement investments. Seniors who were sold annuities or life insurance investment plans that did not work as promised may be able to get some or all of their money back with the help of a class action lawsuit investigation into fraudulent practices.

Among the most common complaints raised in annuity fraud lawsuits is that the language is intentionally vague or so complicated that policyholders don’t understand what they’re signing. By making a contract overly complex, victims claim that the companies are designing a system that’s similar to a bait and switch.

Understanding the common flaws in the business of annuities can be helpful, no matter where you are in the planning of your financial future.

For one thing, just how annuities does a person really need? If a financial planner is pushing you to buy another annuity (which you think is your first), that can be problematic. Many employers include an annuity as part of an employee’s benefit package.

Also, just about anyone who has worked in the U.S. has paid into Social Security, which in essence is a deferred annuity for a group (the group being workers in the U.S.).

Even the way annuities work can be confusing. Once an annuity has been purchased, your money might appear to be gone because you really don’t have access to it. Once you’ve completed the terms of your contract and agreement, however, you will (or should) get the monthly payments.

Keep in mind that no lump withdrawals will be available, because annuities lock in the terms. Don’t count on an annuity for emergency situations. Instead, make sure there’s plenty of liquid cash, completely separate from any retirement savings such as annuities. In some instances, such as with 401Ks, you may be able to borrow a lump sum for certain situations although that’s almost never a good idea. The loans can come with high interest rates and you’re really paying interest for money that’s yours.

Annuities, when designed and executed well, can provide a cushion in retirement, but there’s still no such thing as getting something for nothing. You’ll be paying to get an annuity contract, and if you go with a variable contract, fees are probably going to be higher. There are distribution costs along with insurance fees, and they can often go above 3 percent.

Good to Know

Many people are drawn in by deferred annuities, since these contracts let investments grow tax free, or at least that’s how some financial advisers can make it seem. Yes, the profit that’s earned isn’t taxable. However, that only last until you start collecting on the annuity. When the annuity starts to issue disbursements, those payments are taxable. It could be considered the same as regular income.

>>Annuity Lawsuit: Get Help Now

It’s also easy to get overwhelmed in the complexity of the legal jargon connected with annuities. They can be difficult to understand. It’s best to work with a qualified, reputable broker who has a verifiable track record and plenty of experience.

Be wary of too many riders. Those are the options to customize the annuity. The more it’s customized, the more expensive it is. Your agent or broker should be patient, and happy to explain these often complex terms. If they seem to dodge questions or stick to vague explanations, you might want to take your business elsewhere.

Suspect an Annuity Scam?

Do you think you or a family member were the victim of an annuity scam or deceived about the terms? You might qualify to file an annuity lawsuit with no out-of-pocket cost to you. Read more when visiting the Life Insurance Claims Lawsuit & Annuities Fraud Class Action Lawsuit Investigation today. While there, you’ll be able to submit your information for a free case evaluation and receive complimentary legal advice if you have a case.