Indexed Annuities on CNBC’s “On the Money”
Mark, age 39, reported on CNBC’s “On the Money” program that he invested $175,000 into Equity Indexed Annuities over the past five years and the value today is over $225,000. He has friends telling him to surrender the annuity for the $200,000 “put it into the market.” Mark asks the panel if this is a good idea. Off camera Mark must have told the panel that the surrender period ends in May, which explains why two of the panelists suggest that he wait a few more months to review this product.
See http://www.youtube.com/watch?v=iOyXfcB9r6s
Here are some highlights:
“It’s a ludicrous penalty (obviously understands that annuities have a 10% tax penalty prior to age 59 1/2) – you shouldn’t get out now. This is an Equity Indexed Annuity. That means that your principal is protected – you are going to get $225,000 out of this annuity.”
(By getting out) “You are looking at product picking . . . this product here, this timing here . . . you really need to sit down and work out a plan to decide what you are trying to accomplish over time . . . what is this money for?”
“You started with $175,000 and now have $225,000 now? I wish I had a product that had grown from $175,000 to $225,000 in the past five years, that’s not bad.
“Don’t try to time it [the market] we saw what happened today . . . if you put all your money in one day, you could lock in your losses.”
“This is a 5.15 – I figured it out – a 5.15% rate of return for the past five years. You should patting yourself on the back – actually thanking that person that sold you the equity indexed annuity – stick with it!”
It is refreshing to see a few positive statements made by the press and about fixed indexed annuities.
The take home message for agents: sell the product that is best for the client as Mark’s agent obviously did. Five years ago, when Mark was age 34, he must have been looking for a safe place to put $175,000, for the long term, that had tax deferral, and the potential to earn an interest rate higher than most other safe-money accounts.