Posted inInvesting

The Annuity Scam

seasoned_geek by seasoned_geek

I poke around on financial sites from time to time. Yes, I see the late night commercials as well, when I’m awake late at night. No matter how many legal beagles and politicians swear up and down they are legit, the long history of annuities which took peoples money then disappeared to countries without extradition treaties (both real and imagined) will not be forgotten by the scammed or those they can tell in a 24/7 connected universe.

Someone once said the editors at Yahoo Finance couldn’t find a lit candle in a darkened room and after reading this article I firmly believe it.

Why in God’s green earth would anyone throw $20,000 into a murky barely understood annuity hoping to get just shy of $900/month some 20 years from now? The reason annuity sales have stalled is that they SUCK! They have finally proven P.T. Barnum wrong by running out of suckers. The example from the article says you buy at 65 an annuity which won’t start paying you just shy of $900/month until you hit 85. Odds are, it is non-transferable so when you reach life’s great checkout counter just a couple of years later, guess who keeps all that money?

There are many legitimate sites out there which report the dividend history of ETFs (Exchange Traded Funds) and stocks. Personally I prefer the ETFs since they are a basket or group of stocks spread across many companies, usually within an industry. This protects you from a Volkswagen diesel emissions bomb or a Jared Fogle sex with minors court case. One company may vaporize overnight, but, generally, the ETF doesn’t sink or much notice. If an entire industry tanks, like say oil drilling, and you hold an ETF focused on oil drilling industry, well, you will take a bit of a hit. As long as you realize industries have cycles and don’t panic things will be well.

My point is you can take that $20,000 and spread it across half a dozen monthly and quarterly dividend paying ETFs. Each month you take the money which lands in your brokerage account and re-invest in the same or other ETFs. Since the article in question stupidly uses a 20 year time frame, do the math. It shouldn’t take long before you calculate how dividend paying ETFs snowball down the mountain past murky and un-trusted annuities.

That’s the reason nobody buys annuities today.

Roland Hughes started his IT career in the early 1980s. He quickly became a consultant and president of Logikal Solutions, a software consulting firm specializing in OpenVMS application and C++/Qt touchscreen/embedded Linux development. Early in his career he became involved in what is now called cross platform development. Given the dearth of useful books on the subject he ventured into the world of professional author in 1995 writing the first of the "Zinc It!" book series for John Gordon Burke Publisher, Inc.

A decade later he released a massive (nearly 800 pages) tome "The Minimum You Need to Know to Be an OpenVMS Application Developer" which tried to encapsulate the essential skills gained over what was nearly a 20 year career at that point. From there "The Minimum You Need to Know" book series was born.

Three years later he wrote his first novel "Infinite Exposure" which got much notice from people involved in the banking and financial security worlds. Some of the attacks predicted in that book have since come to pass. While it was not originally intended to be a trilogy, it became the first book of "The Earth That Was" trilogy:
Infinite Exposure
Lesedi - The Greatest Lie Ever Told
John Smith - Last Known Survivor of the Microsoft Wars

When he is not consulting Roland Hughes posts about technology and sometimes politics on his blog. He also has regularly scheduled Sunday posts appearing on the Interesting Authors blog.