Monday, January 15, 2007

from WSJ Weekend Edition -- "Smart Retirement Shopping" - Updated

"Smart Retirement Shopping. High-Pressure Tactics target Seniors' Savings; Avoiding the Hard Sell"

The lead sentence: "Winston Wong first learned about reverse mortgages over a plate of chicken."

It's worth a trip to the library if you aren't a print or WSJ Online subscriber. It's on page "B1", and it is an eye-opener. The paid-subscription link is here.

The story is called "Smart Retirement Shopping", and it would be a genuine public service if they made this article freely available -- it's that good. It's got an overview of today's commonly-seen abusive high-pressure sales pitches and inappropriate products being hustled about by unscrupulous salespeople with seniors' money in mind. It has the products, discussion of the hard sell, the pros and the cons, and how to fix it, if possible. Not everything is bad with these products; some of them have a place, or less-expensive versions or alternatives that exist. And some of the people selling these things actually do have things in mind in addition to getting their next commission check.

Discussed are:

(1) Life settlements, which provide a way for a salesman to get another fat commission buying back your life insurance policy (for which he or another salesman already got a big, fat commission when you bought the policy -- do you see a theme here?) so you can get some of your cash back when you need it.

(2) Reverse mortgages, which have their uses but are usually pretty expensive.

(3) Variable and indexed annuities. Be careful. Be really careful with these. I have written before on these, and the problems with them are big. A very few "no-load" variable annuities exist, and some even have sub-accounts with excellent index and asset-class replication funds to work with. Here is a suggestion. Before you sign on the dotted line for one of these, do yourself a favor -- first, demand a signed, full written disclosure in plain English of how much the salesman will receive as his commission, in dollars, both immediately, and in "trails", or afterward, for selling this thing to you. Then, again before signing, do yourself another favor. Do an internet search for "no load variable annuities" and work very carefully from there. you could save yourself a lot of money! I do not have one good word to say about equity-indexed annuities. They are the salesman's best friend. In my opinion, you have a number of better choices.

(4) Life insurance. You just have to read it.

(5) Living trusts. The focus of the article is the folks who are not [I accidentally left out the word "attorneys" here!] sell these things whether they are really needed or not, just to charge you $1,500 for a boilerplate template, or even worse, to find out what you have, so that they can sell you something else and make another commission.

I'm sorry, but there is no free link for this one. If you are in the market for the things discussed, arm youself with all the knowledge you can get. It's a tough financial services world out there.

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