The Last Retirement Account Standing

In recent weeks the financial markets have been in utter turmoil.  Massive failures, forced mergers and unprecedented losses have all but wiped out Wall Street.  Credit markets are frozen, and banks are dangerously close to Armageddon. Hard working families have had their retirement accounts shredded by stomach-churning losses in the stock market.  The global economy is on the precipice of a bone-crunching recession and the massive intervention of governments is not yet working.  Markets continue to be highly erratic, and risk-averse, retirement-minded savers are re-thinking their investment options.

Stocks, bonds, mutual funds, variable annuities and diversified portfolios are now recognized as risky and not for the faint of heart.  Investors have reviewed their risk tolerance and found their losses have greatly exceeded what they thought – and were told by their broker and Wall Street – were possible.  Standing tall and proud above the fray is the fixed annuity that has experienced no loss and has retained the potential for gain should the markets recover.  Added to the guaranteed safety of a fixed annuity is the deferral of current income taxes and the ability to “lock in” at any time a lifetime income.

For years now Wall Street, FINRA (the regulatory authority for broker/dealers), the SEC, brokerage firms and virtually every state Securities Commissioner have bad-mouthed, slandered and trashed fixed annuities as an unfit place to put retirement money.  They have insisted that fixed annuities are bad for the retirement-minded whereas “putting your money in the market” is the safe option.  So much for the “wisdom of Wall Street” because fixed annuities have passed the test of bad times without loss while mutual funds, stocks, bonds and variable annuities have suffered historical losses – and more could come. So why have fixed annuities been the object of so much criticism from Wall Street and their allies?

When a fixed annuity is purchased by a risk-averse, retirement-minded saver more interested in the return of their money than the return on their money, a competing security is not purchased, and Wall Street loses a sale and commission. They respond by trashing fixed annuities with a litany of objections intended to scare, confuse and threaten those brazen enough to purchase something they do not recommend.  Ironically, the securities regulators would like to have authority over fixed annuities which would lead a logical person to question whether they object to the product or the fact that they’re losing fees.  Self-preservation is a compelling incentive that can lead to dishonorable behavior.

The end of the story is that regardless of what you read, hear or see from Wall Street about fixed annuities, it will invariably be derogatory, because their loud voices in all media drown out the truth.  That is until recently!  The 2008 market meltdown exposed the risks of the investments peddled by Wall Street – the 40% plus losses in 401(k) accounts simply cannot be hidden from the working public.  Yet, fixed annuities have not lost one cent on paper or in reality – in fact they’ve continued to trudge forward like the infamous tortoise that eventually won the race with the hare.  The smart saver that rejected the “wisdom of Wall Street” and chose the fixed annuity is without loss – money or sleep – and without cracks in their retirement nest egg.  So the next time a broker says, “fixed annuities are (fill in the trash talk)” you’ll know the “rest of the story”.

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