U.S. Sen. Elizabeth Warren is charging that kickbacks for sales agents are common in the annuities industry and should be considered before making a purchase.
The purchase of an annuity is a common approach to offsetting the expense of retirement as it becomes more difficult to save sufficiently for later years.
An annuity can help offset that shortfall and while these are normally very complex financial instruments, they are basically a way to pay money now and receive guaranteed regular payments at a later date. Annuities are even popular with people who are able to save enough for retirement as they often worry that retirement and end-of-life expenses will deplete their estate and leave nothing for future generations of their families.
However, as Next Avenue reports in “The Seamy Side of Annuity Sales,” U.S. Sen. Elizabeth Warren’s report details that 13 out of the top 15 annuity companies in the United States offer sales agents kickbacks either directly or indirectly through other companies.
The total cost of the kickbacks amounts to $17 billion a year.
One problem with a sales agent receiving a kickback for selling you an annuity is that he or she potentially then has an incentive to sell you something that you do not need or that may not be the best thing for you. The agent does not have an incentive to understand your unique situation and come up with the best solution for you.
Another problem is that the $17 billion going to kickbacks is $17 billion that is not going into American’s retirement funds.
It may be best to seek the advice of independent professionals about retirement and estate planning rather than just listening to a sales agent.
Reference: Next Avenue (Nov. 12, 2015) “The Seamy Side of Annuity Sales”