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Saturday, September 22, 2012

OpEd: Firms leaving annuity business signals problems ahead:

http://www.foxbusiness.com/industries/2012/03/21/heeding-paulsons-advice-hartford-to-leave-annuity-business/# Recently Hartford Insurance announced they are leaving the annuity business. Also recently Sun Life announced as well as others. Why? Some of these firms have "guaranteed" returns for their products that they cannot produce and still make a profit. That is the problem. And that is the problem for retirees. The problem of the intervention of the Federal Government in forcing rates so low that at the same time that there is clearly risk, there is no yield for investors, puts all logic on it's ear. It is a prospect for retirees that it would take $4,000,000 in a retirement account yielding 1.5% to get a annual income of $45,000. Now do the math for how much you have in savings. Now you get the problem. I am convinced that the recent battle about pensions in Wisconsin was NOT about the past...It is about the future. Wisconsin has the best public retirement system in the nation. Its advisors are used as models for other investors who watch their every move. However...as in the advice in all investment literature---the past success does not guarantee future results. Few people listen to that mantra, including all the tv pundits that are predicting the future. There is currently a proposal to allow the WRS system to include private pensions so that ALL public and private employees could have the benefit of professional management of their pension. I like that idea. However, the problem of allowing market rates to rise to their natural level remains in the future..it will happen.

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