Even Math Teachers Are at a Loss to Understand Annuities
November 9, 2016 by TARA SIEGEL BERNARD
Even a well-caffeinated person with an advanced degree in math would have a hard time deciphering a 53-page contract called “Your Flexible Premium Indexed and Declared Interest Deferred Annuity Policy.”
Melanie Panush Lindert, a 66-year-old elementary school dance teacher in Los Angeles, was sold one of these mind-numbingly complex products last year through her workplace retirement account. The same agent had sold her three other annuity contracts over the previous eight years, including another within her retirement savings plan — a so-called 403(b) — which is offered to employees of public schools, colleges, religious groups and nonprofits.
Annuities can be hard to fully grasp even in their simplest configuration, where you hand a pile of money to an insurance company, then receive a guaranteed stream of annual income for life. But schoolteachers and other people doing good works are often left to trudge through a morass of contracts tied to some of the most arcane investments, sold by representatives who may not fully understand the inner workings themselves.
“A lot of teachers are good rule followers,” said Tony Isola, a former history teacher turned financial planner who heads the 403(b) division at Ritholtz Wealth Management in New York. “The salesperson comes in, they are really nice and they sell them a bill of goods. And then they tell the other teachers.”
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Additional articles in the 403(b) series:
An Annuity for the Teacher — and the Broker
Think Your Retirement Plan Is Bad? Talk to a Teacher
Answers to Questions About 403(b) Plans