Personal Finance Gurus Can Ruin Your Retirement

Man, I’m so sick of tv and radio personalities, personal finance blogs, and media outlets writing inaccurate information about annuities and retirement planning to collect a check or gain new followers. So I’m going to list every inaccuracy published about annuities, and I will keep adding to it.

Maybe they’ll get some sense to collaborate with annuity and insurance experts instead of hiring writers or spitballing false information.

“A jack of all trades is a master of none.”

If you want a good steak, do you go to The Cheesecake Factory?

No.

Why?

Because they have 100 different entrees on their menu.

It’s almost impossible to be the best at everything if you cover too much ground.

These “gurus” are just that.

It is impossible to be an expert at everything.

There’s always assumptions and opinions, but no hard research.

You can talk to me about credit card points, coupons, and ways to save money, all day.

Just don’t educate me on serious financial investment or retirement planning advice if you don’t know what you’re talking about.

Annuity Plans At A Glance

The Destruction By Misinformation

A few key points that none of these personalities address is

• the number of Americans living beyond age 90 are expected to TRIPLE over the next 30 years
• 70% of retirees turning age 65 can expect to use some form of long-term care
• Inflation is starting to skyrocket

Annuities all help assist with these problems that occur during retirement.

Did you know that long-term care costs are increasing so much and the care is desperately needed that Washington state created a new payroll tax for the unforeseen problem at hand? I think most retirees ages 70+ will go broke within the next 10 years due to long-term care costs.

Isn’t it the financial advisor’s responsibility as a fiduciary to have planned for these ever-increasing costs? Yes.

So why didn’t they plan appropriately?

So why do these personalities provide such misinformation? I think annuities can be automated money management tools, sometimes more efficient than the wealth manager themselves. If the money managers can’t control the money, what is the purpose? If annuities pay a one-time commission, why promote them?

Another consideration is the longevity of the advisor themselves. Once the advisor retires, they sell their “book of business” to someone else. With annuities, there’s no passing of the torch.

Personal finance blogs are WRITERS, not experts.

In most cases, personal finance contributors are writers, not experts! They are paid writers who write for content generation without professional experience for the media outlet to gain more Google traffic.

Most large blogs operate to find a keyword to rank for in Google, pay a freelance writer to write a long generic and regurgitated guide so that they can grab new readers.

Why do they want more readers? Because they get paid by advertisers every time a reader stumbles upon their page. The more readers, the more money they make.

Financial Radio Shows is one very long commercial.

Financial professionals pay a radio station for airtime. Anyone can do it if there is airtime available. A radio host does not equal an expert nor expert advice. The same goes for podcasters.

Oh, and don’t believe every caller. There are a lot of cases where callers are staged to set up a radio personality.

Even TV commercials are disguised as an extension of a popular talk show, local news, or variety show to make the financial professional look like an expert on that show, but they’re really not.

I list a prime example below.

Youtube Stars are not experts.

Look, I enjoy watching educational videos on Youtube. I watch lawn care videos all the time. It’s relaxing to me.

I don’t take advice from some person with a camera spitting out financial advice.

If you’re ready to quit your 9 to 5 job to make over $100k in 30 days, watch now!

Gimme a break.

Don’t you hate car salespeople?

Forbes

Dan Rodeck – “Before writing full-time, David worked as a financial advisor and passed the CFP exam.”

Inaccurate Article: Retirement Basics: What Is An Annuity?

The amount you earn from an indexed annuity is determined by the performance of a market index, like the S&P 500. Your annual return is calculated over the course of a specified period, typically one year. When the index gains value, the value of your index annuity increases, but it also loses value when the index declines.

Dan Rodeck – Forbes Contributor

Hey Dan – You can’t lose value in your fixed indexed annuity if the index declines. Fixed indexed annuities are insurance products (not investments) that do not participate directly in any market.

Fixed indexed annuities are a type of fixed annuity that earns interest based on changes in a market index, which measures how the market or part of the market performs. The interest rate is guaranteed to never be less than zero, even if the market goes down.

– National Association of Insurance Commissioners Buyer’s Guide

Dan got the annuity basics wrong.

Now imagine if you took investment advice from Dan where you could lose money.

Way to go, Forbes!

It’s a great thing you passed the CFP exam. Don’t even get me started on certifications.

Wes Moss

Wes (radio personality and personal finance writer) uploaded a video explaining a very generic and inaccurate explanation of Fixed Indexed Annuities.

The listener said a Fixed Rate annuity; Wes baited the caller and switched from Fixed Rate Annuity into a Fixed Index Annuity.

Once again, radio personality, not an expert in annuities.

Does he give this generic advice on investments?

You’re handcuffed to annuities.

You can’t take the money out for 7 years, 10 years, in your case, I dunno, 12 years.

Wes took an assumed 12% surrender penalty from the caller and switched it to 12 years before his caller can get out of the contract. This might be true, but a 12% surrender penalty and a 12-year surrender period are 2 completely different things that make me feel Wes is a bit flaky.

Now to answer Wes’s generic objection. Yes, there annuity contracts that range from 2 years to 20 years in length, but not every contract is 12 years long. In fact, there are contracts that offer up to 100% liquidity called a Return of Premium benefit.

Examples of Annuities With Extra Liquidity

• Great American Safe Return
• Equitrust MarketTen Bonus

Short-Term Annuity Example

• 2-Year Annuity
• 3-Year Annuity

Anyone buying an annuity should know the long-term commitment and understand there aren’t “handcuffs,” as Wes would put it, if you choose the right contract.

This is why I state, “Not all annuities are created equal.”

Fixed Indexed Annuities with No Market Upside

Wes states he’s never seen an indexed annuity with market upside. Well, that tells you he’s never seen an indexed annuity annual statement which leads me to believe he’s never sold one, purchased one, or frankly really knows about annuities in the first place. Yet, he’s giving financial advice on a product he knows nothing about.

He’s a radio personality, not an expert on annuities.

The formulas don’t only allow for upside growth.

Wes, if you’re reading this, I own 3 annuity contracts. I’ve received over 13% in one year on one of my personal annuities—what a joke.

I ran an experiment back in 2016 and purchased a small $10,000 annuity to see if indexed annuities can make some solid growth.

Here’s a snapshot of my most recent annual statement to prove that fixed indexed annuities are designed for some market upside which Wes states aren’t designed for much growth.

As you can see here, since February 2016, I’ve earned $3,750 in interest, which comes to a compound annual growth rate of 8.29%. Oh, and I haven’t paid any fees, and I haven’t lost a dime due to the pandemic.

Oh and neither of these annuities charge a fee. No fees!

Results matter here, people.

Annuities have hefty fees.

In this video, Wes takes a call from a “caller” about annuities. Her advisor recommended an annuity, and she didn’t know the name or product type; Wes goes right into variable annuities with hefty fees.

Um, Wes, yes, you pay 3% – 4% in fees annually in a variable annuity which is a lot, but you can find good annuities that have no fee as well (see above).

Dave Ramsey

What does Dave Ramsey say about annuities? I like Dave Ramsey, but I have to correct the inaccuracy. In this video, Dave advises a caller that I think wasn’t meant for an annuity, and Dave’s advice was probably the right thing to do.

However, he goes into a very generic, dated, and high-level explanation of how annuities work.

Surrender charges

Dave makes a facetious comment about 40% surrender charges. In most cases, there are surrender charges. There are contracts without them. Outside of two-tiered annuities, I’ve yet to see a surrender charge close to 40%.

There are short-term annuities and annuities designed with extra liquidity too.

There are only 2 types of annuities available.

Dave says there are fixed annuities and variable annuities, and that’s it. Wrong.

There are 13 types of annuity contracts.

Oh, and fixed annuities have been between 3% and 4% for the past 5 years or so (pre-pandemic), not 1% to 2%.

Fees

Typically there are no traditional fees in a fixed annuity or immediate annuity.

You will pay a fee for an additional benefit or “Add-on” like an income rider or enhanced death benefit on long-term care, fixed indexed, or variable annuity.

There are even annuities with income riders with no additional fee.

Annuities with No-Fee Income Riders

• Allianz 222
• Athene Agility

Jeff Rose and Good Financial Cents

Once again, another personality, not an expert in annuities. This guy makes money off advertisements. He wants your eyeballs.

In this video, Wealth Hacker – Jeff Rose states annuities have high fees and high surrender charges.

Like other personal finance “gurus,” he is generalizing annuities and doesn’t talk about any of the pros which are

• Lifetime income
• A guaranteed death benefit
• Principal protection
• Liquidity
• Long-term care assistance
• Inflation protection
• No contribution requirements

Come on, Jeff, you don’t mention the protection from market volatility on an indexed annuity.

You don’t mention the lifetime income on a Roth that is tax-free too.

Not all annuity contracts have high fees or high surrender charges.

There are hundreds of annuity products. You just have to look for the good ones.

You wouldn’t generalize investments as a penny stock, so why generalize annuities?

Hidden Fees

Dear Jeff, you must not sell annuities because every statement I receive has the fees stated as clear as day. In fact, annuity companies over-communicate statements and fees.

Just about every official illustration illustrates the fees.

Epic fail. You’re better than this!

Nerdwallet

So anything Nerdwallet publishes, you have to take with a grain of salt.

They’re basically a giant affiliate ad website with little to no desire to inform their readers with accurate information.

Just read their advertiser disclosure:

NerdWallet, Inc. is an independent publisher and comparison service, not an investment advisor. Its guides, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. They are not intended to provide investment advice. NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance.

We believe everyone should be able to make financial decisions with confidence. And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward — and free.

So how do we make money? Our partners compensate us. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services.

Ok, so Nerdwallet uses a financial advisor for some of their annuity content, but know this information is still skewed, generic, and inaccurate.

Other annuity information is from unqualified writers. Read below.

Oh, and this financial advisor paid to be in Nerdwallet’s Ask an Advisor program, leading me to believe there is no vetting or research on annuities.

This basically is a paid advertisement to rank for organic keywords.

Since this guide has been released, Ask an Advisor has shut down, and the content stands, which means there’s no intent to publish accurate information.

What consumers need to know about annuities

Inaccuracies

In this guide, I debunk the inaccuracies from Nerdwallet:

• High Fees – Annuities can charge between 0% to 4% in fees annually. You get what you pay for, and they are not hidden.
• Limited investment options – Most contracts these days have at least 5 investment or allocation options.
• Annuities are complex – Annuities are fairly simple to understand. If you don’t understand the contract provided, either look for another annuity or another advisor explaining the product better.
• Annuitizing the contract – Another cliche, this advisor classifies all 12 types of annuities as annuitizing the contract, and every annuity owner is stuck, which is the furthest thing from the truth. Only immediate annuities and Deferred Income Annuities require annuitization.
• Agents sell annuities for a high commission even when it’s not the right fit for the client – I debunk that here.

Speaking of high commissions, if you notice in this guide, Nerdwallet links to another guide to capture an affiliate commission from Quotacy for Nerdwallet’s benefit, not yours.

Annuities Vs. IRA

Ummmm, why can’t you have both?

A prime example of inaccurate and dangerous information on financial advice.

The writer: Kevin Voigt, published this guide on April 30, 2020.

Kevin Voigt is a staff writer at NerdWallet covering investing. He previously was a reporter with The Wall Street Journal and business producer for CNN.com in Hong Kong, where he was based for nearly two decades. When not writing, you can find Kevin playing in bands and working the land at his Whidbey Island home outside of Seattle.

– Nerdwallet

Seriously, you’re going to take advice from this guy? Where’s your hacky sack, Kevin?

No inflation protection

Inflation will erode the buying power of a set payment amount over time. – There are plenty of annuity products with Cost of Living Adjustment riders to keep up with inflation.

Inflation-Adjusted Annuity Examples

• North American Income Choice 10
• Midland National Income Advantage

You have limited or no say in annuity investments

Outside of immediate and deferred income annuities, most annuity contracts offer investment or allocation options that can be selected by the owner and the ability to switch each reset period to “bob and weave” through various market trends.

You get a set return, and the insurer keeps the difference if the investments do well.

Man, where do I start here?  This is the biggest pile of false information I’ve ever read.

With fixed annuities and MYGAs, you might get a set return like a CD, but not other deferred annuities.

If you notice Kevin, he regurgitates the same tagline about the high commissions.

So Kevin, stick to listening to the Grateful Dead and less on financial advice.

The Money Guy Show

Ok, these two are the worst, and frankly it makes me nervous about the credibility of their financial advice.

Another personality duo that goes to say, “Hey, we’re not saying all annuities are bad,” then at the 2:45 minute mark, “Basically, there are 2 types of annuities”.

From that point, I’m ready to tear into their “professional” explanation of everything annuity.

You can’t keep up with inflation.

First, I can’t believe they compared costs from 50 years ago to today. What the hell? Of course, prices are going up what a lame setup, and the smell of a “Sunday, Sunday, Sunday” arises.

So they state fixed annuities don’t keep up with inflation. Ok, fine, what about the other types of annuities.

Oh wait, there are only two types of annuities. Amateurs.

At the 13:59 minute mark, they pivot to deferred annuities, but not once did they mention a Cost of Living Adjustment payout on immediate annuities. Huge red flag.

Limited Legacy

Ok, these two knuckleheads go right into immediate annuities and talk about the single-life-only payout with no death benefit.

The Money Guys are correct because there is no death benefit on a single life payout, but don’t mention the other 5 or 6 annuity payout options with death benefits included.

Note: A Single-Life Only annuitization payout (not lifetime withdrawal) will not leave a death benefit in any circumstance. The other hundreds of annuity products typically have standard or enhanced death benefits.

This is exactly why I do not like personalities because they “cherry-pick” information for their personal gain.

Fellas, give us all the pros and cons. This is what’s wrong with the financial industry. “What serves me, not you.”

I’m at the 13:14 mark; I’ve yet to hear about enhanced death benefits on deferred annuities.

Fear and Greed

For guys that talk about fear and greed in the sale of annuities, this video seems to be just that for their viewers. What are they luring readers to buy? Hmm.

From what I can tell from this video, The Money Guy Show are not experts in annuities, and for fear of what they don’t know, they do not like annuities.

I’m wondering how this affects their investment recommendations for their clients?

They just recorded a 1-hour video about annuities, consolidated all 12 types of annuities into 2 types of products, played on the viewer’s fear by saying “The Harsh Truth About Annuities.” Hypocritical.

It’s almost like these guys think people are dumb, and they have to spoon-feed information.

If they don’t know at least the basics of annuities, how well do they know investments or retirement plans?

Roth IRA and Annuities

Any distribution from a Roth IRA annuity is tax-free (including lifetime withdrawals) as long as

• The distribution is made after a 5-year holding period.
• Distributions are made under one of the four conditions:
  • Owners have attained age 59.5
  • Distribution is paid to a beneficiary at the death of the owner
  • The owner is disabled.
  • Withdrawals are made to pay first-time home-buyers expenses ($ 10,000-lifetime limit).

Indexed Annuities are not Investments.

The fellas are walking on shaky ground, lumping variable and indexed annuities together. At some point, this might bite them where the sun doesn’t shine, legally.

Variable annuities are investment annuities. Indexed annuities (also known as equity-indexed or fixed-indexed annuities) are insurance annuities.

Oh, and there isn’t limited downside protection; there is 100% downside protection from market volatility on indexed annuities.

I’m only at the 24:16 mark, yeesh.

Surrender Periods

Look, all annuities have surrender charges and periods.

Some annuities are short-term (2 years is the shortest term) and have extra liquidity (accumulated penalty-free withdrawals, nursing home waivers, terminal illness waivers, long-term care waivers, bailout waivers) or total liquidity (Return of Premium).

24:13 mark. Fellas, be sure to mention the short-term annuities in addition to 12 or 15-year annuity contracts. Most consumers don’t buy that long of a contract unless they’re exercising the lifetime income option.

You can not touch your money

24:14 mark.

You can access your money through the mentioned above and annual penalty-free withdrawals.

High Commission

The average commission for an annuity is:

• Immediate Annuity = 2.5% one-time commission from the insurance company
• Fixed Annuity = 2.5% one-time commission from the insurance company
• Fixed Indexed Annuity = 6% one-time commission from the insurance company
• Variable Annuity = 6% one-time commission from the insurance company

If you charge a fee for managing money, you are typically charged 1% to 3% annually of your total portfolio, and the fee is withdrawn from your personal money, not the insurance company’s money.

This does not include any additional commission made from insurance companies, fees charged inside a financial product, and I imagine these guys have received bonuses, incentive trips, dinners, etc.

So if these fellas manage your money for 10 years, the consumer is giving up between 10% and 20% out of your pocket.

With that said, do not talk about high commissions because you probably make more than an annuity commission.

Index Annuity Returns and Growth Strategies

Most index strategies are not capped but rather have participation rates.

It is rare for a combination of a cap and a participation rate in one index strategy. It’s usually a cap with 100% participation or no cap with a specific participation percentage.

Changing rates or renewal rates are common in annuity contracts. The caps and rates can change on most contracts, and they typically go down, not up.

This is why you need to purchase an annuity with solid renewal rates, and only an expert can tell you which companies are good and which are not so good. These guys clearly are not the ones to ask.

Changes in the contract itself, like a bonus, contract length, income rider guaranteed period, the ability to lose money to market volatility, aren’t true. It’s a legal contract, and the insurance company has to abide by the terms just like you do.

Skewing the facts.

Oh, and they didn’t once mention locking in all of your gains with annual reset. It’s funny how they left that out. It’s ok to go up and down in the market along paying fees regularly, but it’s not ok to talk about the pros of an index annuity.

Minimal Access To Money

27:50 mark.

“Most of these annuities allow 5% a year.”

For the last 11 years, 10% has been the standard.

Don’t skew the facts, buddy.

You don’t forfeit bonuses on penalty-free withdrawals hence the word “penalty-free.”

You do pay a surrender charge if you withdraw more than the annual penalty-free amount, but the charge is only on the amount above the allotted amount, not the entire amount.

The Bonus

Holy shit. Pardon my language. This is so wrong. Run from these guys. RUN. Don’t buy an annuity. Don’t buy any financial advice from these 2 idiots.

In the past 11 years, I’ve only seen 1 annuity product called the Allianz MasterDex 10 Plus (not to be mistaken with the MasterDex X), where someone had to annuitize the contract to get the bonus.

Most bonus vesting schedules play alongside the surrender period, and very few go beyond that. Look, the insurance company doesn’t want you to take the free money and run, hence prorating the bonus if you leave early.

Most bonus annuities aren’t that great anyway.

Riders

You get what you pay for.

If you’re buying an income rider, you are paying for a flexible lifetime income, not the most upside.

You don’t sound like a professor, so please don’t assume that. The facts I’m mentioning here make you sound like a used car salesman playing on people’s fear. Fear and greed. Fear and greed.

Their Skewed Illustration

The one thing I did notice is they illustrate the performance, but not what the consumer receives. How much of the performance did the consumer make after fees? Did the consumer lose all of their money?

And just for the record, the stock market has always beaten an indexed annuity because an indexed annuity is designed for safe, steady growth with downside protection from market volatility, not compete with the actual stock market.

The Money Guys are comparing apples and oranges. Skewed.

Fees

They go over fees for variable annuities and do not separate them from the other types of annuities.

Annuities left out

So this virtual classroom went over immediate, fixed, fixed indexed, and variable annuities.

They did not go over long-term care annuities, deferred income annuities, QLAC, Medicaid annuities, or other features.

If these 2 are fiduciaries, they are not doing what’s right by a client, and frankly, this could bite them in the rear end sometime in the future for poor, inaccurate financial advice.

Clark Howard

Clark Howard is a personal finance guru that uses inaccurate information to generate eyeballs so he can be paid by:

• Advertisements: Clark wants eyeballs on his website because he gets paid by companies to advertise.
• Affiliate Marketing: If you click on a link within Clark’s website, he may get paid a commission, all at the expense of providing consumers poor financial advice.

In the following guide, Clark’s writer Christopher Smith writes the following false statements:

• Annuities have hefty commissions: This is false. Commissions are similar to the commissions of a real estate agent, except advisors have to manage the annuity for the contract’s life. Learn more.
• Annuity owners are prisoners: Clark Howard considers annuity contract owners to be “prisoners” but recommends the 2 annuity types that lock up a retiree’s assets for life and does not talk about the annuities with liquidity, no fees, and overall solid benefits to a retiree.
• Clark says there are 3 types of annuities: Wrong! There are 13 types of annuities.
• High Fees: If Clark’s writer did a little bit more research, he would have learned that there are
  • annuities without fees and
  • annuities that are 100% liquid and
  • short-term annuities.
• Clark wants to lock up your assets: Clark says there are 2 annuities that are great immediate annuities and longevity annuities. He is actually advising that it is ok to give up control of your money to the insurance company and possibly lose a death benefit. WOW! Talk about a stand-up guy. What his goon writer doesn’t talk about is
  • the income payments are much lower in most cases than in other annuities,
  • inflation will destroy your retirement lifestyle with these annuities, and
  • there’s no liquidity in case of emergencies.

If you look closely at the authors of Clark’s guides, they are written by “content writers” and not Clark himself. You can see Christopher Smith, Clark’s finance writer, is well, a writer, not an expert in financial planning, in any way, shape, or form.

Chris takes portions of information from other experts’ websites. The problem with this is Chris nor Clark truly understands what annuities are and how they work.

The result is consumers making terrible financial planning mistakes and him profiting from the false information.

Clark Howard is a hypocrite. “Team Clark is adamant that we will never write content influenced by or paid for by an advertiser. To support our work, we do make money from some links to companies and deals on our site.”

He talks poorly about how an advisor is paid on “hefty commissions,” yet he gets paid from advertisements and sells products by providing fear tactics and false information.

This List

If you’re reading this post, know the following:

This guide is cathartic for me. I hate reading fluff, high-level, dated content that is nonsense.

I’m not out to get anyone, but when your career has been primarily about annuities for the past 11 years, it’s very frustrating to me to see inaccurate content and financial advice for the sake of gaining readers.

We’re talking about people’s retirement, so why are we presenting inaccurate information for personal gain?

And look, I’m human. I make mistakes, but I try my best not to give financial advice on topics I’m not familiar with. It’s too dangerous.

And this is why I’m less of a “personality.”

With all this said, I’ll be updating this list as regularly as I can. The internet is big, and my time is short.

If you have a question, email me.