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June 03, 2011 at 08:00 PM
The Consumer Federation of the Southeast (CFSE) says teachers should look carefully before investing retirement plan assets in indexed annuities.
An indexed annuity is a product that is defined as an insurance product, rather than a security, by the federal government. The annuity offers a guaranteed minimum rate of return along with the potential to get a higher rate of return if a stock index or other investment index performs well.
The CFSE, Tallahassee, Fla., is not necessarily criticizing all indexed annuities, but it says “unscrupulous investment brokers selling funds with exorbitantly high fees” have been targeting teachers and other public employees in recent years.
Indexed annuities can be very confusing, in part because of the many different methods issuers use to compute gains in the underlying index, the CFSE says, citing an alert from the Financial Industry Regulatory Authority, Washington.
