The Retirement Survival Guide by Julie Jason

Author:Julie Jason
Language: eng
Format: epub
Publisher: Sterling

Table 11-3 Example comparing possible payment to salesperson for sale of GMIB vs. popular mutual fund

The bottom line? Know what the salesperson is getting paid when you buy, and be sure you are buying the product because it’s the best product for you to own.

Julie’s Rating:

How Motivated Is Your Salesperson?

Eager to Sign You Up.

While no ethical salesperson will be motivated by his compensation alone, this product will likely produce an attractive commission.

How Easy Is the GMIB to Understand?

The GMIB’s promises are easy to understand, as we’ve seen. The conditions under which those promises are delivered or restricted and the product’s other limitations—now, that’s a different matter. That may take some work for you to uncover working with your salesperson.

It will be a challenge to ferret out the conditions on the guarantees, the true upside potential during the accumulation period, the costs, the limitations on accessing your money (as well as those on investment choices), and the risks of the insurance company going out of business during the annuitization phase.

Just understanding all the moving parts of a GMIB is a challenge: the terms are unfamiliar, and the information you need is buried in hard-to-read legal documents. Who wants to analyze hundreds of pages of legalese and then compare other similar products to get some perspective? (I’ll give you an example of some additional prospectus disclosures shortly.)

For that very reason, buyers tend to rely on the salesperson’s presentation, which by definition is not enough. Consider the comparison shopping you might do when buying an appliance or a TV. You need to do the same with a GMIB or any other retirement product.

Hint: If you are the type of person who doesn’t read prospectuses (and contracts), you’ll want to break that habit. A prospectus contains information that protects you from risking, expecting, or paying too much for a particular investment. The best way to learn how to read a prospectus is to compare two of them side by side. Familiarize yourself with the contents—you’ll see that each document follows a pattern. Compare and contrast.

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