Are Annuities A Suitable Investment For Seniors?

Are Annuities A Suitable Investment For Seniors?


If you have watched any TV recently, chances are that you have seen commercials about annuities. An annuity is an investment product sold by insurance carriers. There are different types of annuities, but they all typically revolve around paying an insurance carrier a fixed sum of money in exchange for a steady stream of income in the future. A common type of annuity sold to seniors is called a “deferred annuity,” which does not allow withdrawals for ten or more years without a penalty.

Types of Annuities

Fixed Annuities vs. Variable Annuities

Fixed annuities typically guarantee somebody a minimum rate of interest and minimum periodic payments. However, a variable annuity will fluctuate with the ups and downs of the market and could be made up of a variety of investment vehicles (stocks, bonds, mutual funds, etc.).

Immediate Annuities vs. Deferred Annuities

An immediate annuity could begin payouts to the investor within the first year of them making payments. However, deferred annuities will lock up the investor’s money for a certain amount of years before they can receive any payments. Under a deferred annuity, if an investor needs access to their money before the deferral period is over, they will typically have to pay heavy penalties.

Equity-Indexed Annuities

An equity-indexed annuity is a type of deferred annuity. The returns of an equity-indexed annuity fluctuate in part based on the ups and downs of the stock market. The rate of return for an equity-indexed annuity is based on a certain stock market index (such as the Standard & Poor’s 500 Index).

Annuities vs. Life Insurance

While both annuities and life insurance deal with issues revolving around late in life care, they both serve different purposes. Traditional life insurance involves making monthly payments to the insurance carrier and benefits being paid out after a person passes away.

An annuity, on the other hand, involves a person paying money to the insurance or investment company for a certain number of years and then receiving a fixed income later in life. The income will be paid for the remainder of that person’s life.

In short, life insurance pays out after a person’s death, and an annuity provides income during the later years of a person’s life.

Common Annuity Scams

Senior annuity fraud is real, and it occurs all the time throughout the state of California. This type of fraud occurs when an elderly person is persuaded to purchase an annuity that is unsuitable or inappropriate for their situation so that the insurance agent can earn a larger commission. This type of fraud is concerning because it often deprives an elderly person of the funds that they need for retirement.

Some of the most common scams concerning annuities revolve around the following:

  • Claims that you will never lose money. You need to be wary of any claim that says you cannot lose money in an annuity, particularly one that is invested in the market. If you are considering purchasing a variable annuity, you need to know that losing money is a possibility.
  • Claims that your annuity is about to expire. These scams often come in the mail in the form of postcards. In general, your annuity will not expire before the end of your lifetime.
  • Phony certifications or designations, such as an agent claiming to be a “Certified Senior Adult Consultant.” It is important for any person interested in an annuity to ask for references and credentials and check them out before purchasing any investment vehicle.

Get Help from a California Annuity Fraud Lawyer

If you have any questions about your annuity, or if you suspect that you or a loved one have been the victim of an annuity scam, turn to attorney Joel Bryant for help immediately. Attorney Bryant has extensive experience handling California annuity fraud claims and other types of elder financial abuse issues. Joel Bryant will walk you through exactly what needs to be done in your situation. This kind of case can become incredibly complex, and trying to handle it by yourself is not advised. Let a compassionate and qualified attorney stand by your side today.