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Do You Attend Retirement, Investment, or Annuity Seminars?
By JLP | September 12, 2007
Do You Attend Retirement, Investment, or Annuity Seminars? If so, I want to hear from you. I want to find out how honest these presenters really are.
Here’s my dad’s experience with one of them:
My dad has attended a few seminars in recent years. The last seminar he attended was a seminar for “seniors” presented by a guy hawking an equity-indexed annuity. My dad said that two inaccuracies (lies) stood out to him:
1. The presenter told the audience more than one time that if they got a 12.5% return, their money would double in 5 years. WRONG! How wrong? Let’s see:
As you can see, it’s clearly longer than 5 years. Either this guy didn’t do the math or he is being VERY LIBERAL with his rounding. Either way, it is definitely misleading.
2. The product this guy was presenting in this seminar was an equity indexed annuity. I don’t know the particulars of this annuity but my dad told me that this annuity capped gains at 10% and any down years in the market resulted in no change to the account balance. So, on down years, the “worst” you could do is get a 0% rate of return. Based on that, what does this tell you? Well, over the long run, your rate of return is going be LESS than 10% since 10% is the MAXIMUM that you can get and we all know that there will be years when you don’t get any return, which will drag down the average.
Well, this guy went and took the S&P 500 Index, went back to 1950, and pulled out all the bad years and told the audience that it returned 15.75% per year. Sounds pretty good doesn’t it? However, remember that the gains in his annuity are capped at 10% so how the heck could these audience members expect to get 15.75% per year? They wouldn’t. In fact, I went back and reran the numbers, capping the gains at 10% and came up with an average annual rate of return of 7.63% (and that doesn’t include fees!).
This guy’s main goal was to get these people to invest in his annuity. It didn’t matter to him that what he was presenting to these people was misleading and confusing. The sad part is that most of the audience members had no idea whether or not this guy was telling them the truth.
Anyway, back to my original question: Do You Attend Retirement, Investment, or Annuity Seminars? If so, I want to hear from you - just be sure you take good notes.
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