Last week I wrote about how insurance companies often represent themselves as “financial advisors” while they attempt to sell you complicated insurance contracts called annuities. But they aren’t the only ones hawking these fee-laden products. If your employer’s workplace retirement plan uses TIAA, (like UK, Transy, EKU, etc.) chances are you’re invested in an annuity – even if you didn’t realize you chose it. Why do the firms that sell annuities like them? The money they reap in fees.
First, what is an annuity? While there are many complicated varieties, the simplest is when you pay a lump sum amount and purchase an insurance contract – called an annuity – that promises to pay you a certain amount for the rest of your life. It sounds great because those of us without a pension have to save, invest and then figure out how to take income from those investments all through our retirement – and that can be tricky. Voila! A perfect solution, right? Well, remember the expression, “If it seems too good to be true, it probably is.”