On last weekend’s Crash Proof Retirement Show, Phil Cannella and Joann Small discussed the latest example of the mainstream media’s failure to report on safe alternatives to Wall Street volatility.
“The mainstream media is confused,” Cannella told the listening audience, “over what annuities really are. As a result, they’re continuing to offer poor financial advice to people in or near retirement!”
On a recent radio call-in show, a caller asked a mutual fund advisor, “What investment would you recommend if I’m looking for an annual return of 5%? Would an annuity be a good idea?”
Here was the response:
“Do not buy an annuity. Do not put an annuity inside your IRA, it’s totally unnecessary. Find out how much money in commissions you would pay—what kind of liquidity is available within the annuity?”
“This is inferring that money is tied up in an annuity, and cannot be retrieved,” said Phil Cannella. “When you listen to a mutual fund salesman answer that question, as a caller, how do you know if you’re getting sound financial advice as opposed to a sales pitch?”
The Crash Proof Retirement Show has covered this topic dozens of times. “Anytime I hear a media outlet confusing people on annuities, I feel an obligation to clarify,” he said.
An annuity is an income stream. An annuity is fixed, interval payments made over time. “When you hear the word annuity, that’s what it is—an income stream,” said Cannella. “It’s a pension, a Social Security check, lottery winnings… fixed payments over time.”
Worse yet, however, the mutual fund advisor never clarified the differences in types of annuities for the caller. “They love to lump all different kinds of annuities together by mentioning fees and ongoing charges—which will make you think you’re dealing with a variable annuity!” said Cannella. “Meanwhile, they’re not letting you know about the fixed annuities that can be very beneficial to your retirement account. In a fixed annuity, the investor cannot lose principal.”
So next time you hear an advisor try to steer a person away from an annuity, Phil Cannella recommends you asked the important follow-up questions—is it a variable or a fixed annuity? The answer could make all the difference in your retirement!
Later, Cannella and Small discussed troubling trends in the stock market. “Three Black Crows” is a rarely seen phenomenon in which the stock market closes at the day’s lowest value for three consecutive trading sessions. The Three Black Crows were observed early last week, bringing up memories of 2008, when two such occurrences preceded the September crash—which, of course, led to the Great Recession. “Research shows that 78% of the time, this leads to a market reversal,” Cannella reported.
“This reflects that even when so-called ‘bargains’ are dangled in front of investors, they turn away. They’re too afraid that the market’s falling apart,” added political insider Dick Morris. “This market was pumped up by big investment banking houses, and now they’re getting out because they know what’s coming.”