Trust Me 2.0

Trust Me 2.0 earlebird.com the consumer annuity Blog

Back in the day, meaning the 1980s, “trust me” annuity contracts were the only products sold. Bet you have no idea what a “trust me” contract is, do you? It’s a term used in the biz to describe a contract that offers an interest rate that doesn’t match its surrender-penalty duration. After the high first-year rate, it was left to the insurer’s discretion what you’d be paid in future years. Credited rates would slowly drop to the minimum guarantee rate. This was when the first-year rate would pay 7%, and the minimum guarantee rate in your contract might be 4%. Some were as high as 5.5%! That sounds damn good now, doesn’t it?

The term “trust me” has never been seen as positive. And, over the course of time, annuity buyers grew tired of the products. “Trust me” fooled them once, but never again. So the “trust me” concept started to fade, and true guarantees took over the fixed annuity industry.

Now that rates are so low, guess what’s reappearing on the annuity radar? Yes, “trust me” contracts. But these “trust me” products aren’t your father’s contracts. Back in the old days, annuity buyers just filled out an application, and the only rate they knew was the initial interest rate. It was all done verbally, with nothing was in writing. That’s the big difference with today’s “trust me” deals. Now insurers make all annuity buyers sign acknowledgement forms stating they know the initial rate is only for a one-, two- or three-year guarantee. Buyers must sign and initial that they understand their rates aren’t guaranteed for the length of the surrender penalty.

Is this a good thing? I think so. Due to bad PR for the industry, as well as avoiding lawsuits down the road, insurers have made buying “trust me” annuities a more transparent process. Does that make these deals better products for buyers? Not exactly. However, my main objective is giving seniors a clearer picture of the annuity contracts they’re buying. If seniors understand what they are purchasing, insurers will be forced to create better products. Knowing what you are buying is good for everyone!

Pay-it Forward:

I think it could be a great time to buy U.S. tangible investments. The list includes real estate, stocks, commodity-type investments and land–but not bonds, and especially not Treasuries or penny stocks or exotic-story stocks. Educate your post-grads on investing now. Start small and learn about what you’re buying. In the long run, the education will be worth more than the investments!

Earl E Bird

I'm Earl E. Bird and I am very concerned about saving for my senior years. I am amazed at the stumbling blocks that exist when saving for retirement. That's why I take my time when making decisions on building my nest egg.

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About the author

I'm Earl E. Bird and I am very concerned about saving for my senior years. I am amazed at the stumbling blocks that exist when saving for retirement. That's why I take my time when making decisions on building my nest egg.

More posts by | Visit the site of Earl E Bird

 
 
 
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