Morningstar Advisor - Spring 2008 - (Page 10) On Topic Do you use annuities and annuities with living benefit guarantees? Let us know at magazine_editor@morningstar.com I do not use annuities in retirement planning, unless a client comes to me already owning one. They are unbelievably expensive financial instruments, are very hard for many clients to understand, and they are not uniform or standardized products. While the main concept may be able to be explained with a crayon, most annuities are layered with very expensive insurance coverage and hard-to-understand concepts like subaccounts, participation rates, caps, and point-to-point values. The “tax advantages” used in the sales pitch are usually offset by the total fees, charges, commissions, expenses, and loads. I see abuses of annuity sales all the time. The most horrifying: the direct rollover of a 401(k) into an annuity. John Farrell Delaware, OH Dan Resler Polaris Office of Merrill Lynch Columbus, OH Some of the guaranteed living benefit deals now are very compelling. I only hope the insurance industry can keep their promises. 10 Morningstar Advisor Spring 2008
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