Shylock (artist's rendition)
Variable annuities are one of the worst investments on the planet, over-sold, over-hyped, and right up there with Nigerian estates locked up in probate and that boat dealership next to Death Valley. But investors keep coming back for more.
Why? Trust. Investment advisers are not selling products. They are selling themselves. “I have a power-aura wrist watch, a silk tie and Italian loafers, and I speak with confidence about the future. Buy my product.” Old people sitting on retirement funds are candy for such Shylocks. In the investment game, as with politics, fear is a powerful motivator, and so security sells.
Variable annuities pay higher sales commissions than other investments. Investors who buy them lock their money up for years (or face steep surrender charges to get at the funds). If by chance they make some money on the locked-up funds, they have two choices: Withdraw the funds, in which case they must pay tax on earnings before they can get their own money back (earnings are treated as “ordinary income” even if originating in capital gains); or, “annuitize” – that is, freeze the investment in time and take it out in drips and drabs. If they annuitize, they must make an agonizing bet on how long they plan to live. Usually they take a “life annuity” that pays them until death. It’s a crappy return on the investment, but they don’t have to worry that it will stop coming before they die.
Investment adviser (actual photograph)
I have done many tax returns for seniors who have their money locked up in expensive annuities, and with each I picture, in the back of my mind, that wrist, that Rolex, that calm assurance that only a sociopath can project while stealing from Grandma and Grandpa. I also feel the utter simplicity and trust of the victims of such legal swindles.
Ma and Pa Kettle face the future
Which brings me to
this: You can lead a donkey to water: Mr. Jay Stevens at Left in the West wondering why Democrats don’t push a progressive agenda to solidify their hold on office. After all, it would be popular and easy to sell to the public in the coming mid-terms.
The underlying logic defies credulity – it is that the Democratic leadership simply can’t figure out that they are pursuing unpopular policies and disappointing the voters. Obama, for instance, knew he had to run on a progressive platform to get elected, and yet once elected abandoned it! What’s up with that?
They can’t figure it out! (“When will the real Obama show himself? When will his inner progressive appear?”)
The image here is kindly and doddering, trusting and gullible Grandma and Gramps sitting across the table from the guy with the Rolex. Swindlers are always with us, but would be living in cardboard boxes under bridges if it were not for simplicity of ordinary people. And this isn’t just Mr. Stevens, but Democrats in general, who are so innocent.
The party leadership is corrupt, as it must be, as it is financed by the same people as the other party. And, hardest for the followers to accept: it has the same agenda.
They only have a different sales pitch. Where Republicans can hard-sell their product because their members are openly greedy and aggressive and unknowingly stupid, Democrats are softer and need a different approach. “Yes, we believe as you do, in the progressive agenda. We want good things for ordinary people. We will fight for Medicare and Social Security. We will reform health care. We will stop the wars, the torture, close Guantanamo. We’ll stop spying on you.
And none of that happens, of course. And poor Democrats, deeply invested find out that there are steep fees if they want to back out of the party – they have to either leave politics entirely or join the other party, which they cannot do. So they annuitize, accept a crappy investment return in drips and drabs, and wonder how it all went so wrong.
The Democratic leadership are Shylocks, the followers naive and trusting beyond reason, and so the party works. It allows the other party to have its way for four, eight years at a time, and then steps in and consolidates the gains made by the other party, perhaps even advancing the agenda in covert fashion, as Obama is doing. It is those who trust Shylock that make this situation so comical, and lead to articles posted on blogs such as You Can Lead a Donkey to Water …
