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Is NAFA  Making Headway with the Media?

Memo to:       Janice Lieberman, The Today Show
                        Kim Lankford, contributing editor of Kiplinger’s Personal Finance Magazine
From:              Kim O’Brien, Executive Director

Re:                  Beware the ‘free’ seminar and other retirement scams

Thank you for your informational segment warning seniors of financial scams. NAFA, the National Association for Fixed Annuities and its members, are interested in making sure that individuals purchase fixed annuities that are suitable to their overall financial plan and meet their retirement needs. NAFA supports and agrees with the caution and tips you provided both on The Today Show and in your written online article. The association sponsors that provides consumer tips regarding seminars and purchasing fixed annuities and invites you to share them with your audience. In addition, we would like to provide a few pieces of additional information. 

Kim Lankford stated that many times individuals can’t touch money in an annuity until they are in their 90s or pay a 10% surrender charge. This is not correct and suggests that she may be confusing the maturity date with a surrender charge. All fixed annuities allow money to be retrieved from them and nearly all without penalty under certain circumstances. The maturity date is a provision required by state law and is typically the LAST date the owner must take receipt of the proceeds, not the FIRST date they are allowed. 

NAFA encourages you to share with consumers that there are fixed annuities with charges as short as three-years and many are available at five, seven and ten years.   New state laws also essentially prevent products with surrender charges longer than ten years. It is important for consumers to know their range of choices.

Also, many fixed annuities offer penalty-free partial withdrawal of a portion of money from their annuity, free withdrawal when they need cash for nursing home confinement, terminal illness, and home care. Many annuities will not charge surrender charges when you convert your deferred annuity to a stream of periodic payments. Also, a majority of annuities do not charge surrender fees when the owner dies and that means that the heirs receive the proceeds from the annuity without paying any surrender fee. Knowing these liquidity features are available helps consumers to shop for the annuity that is right for them. 

Ms. Lankford stated that one of the problems with financial advisors promising unrealistic returns on investments is that many retirees don’t have time to earn back losses. This is one of the primary reasons millions of individuals have chosen fixed annuities. Those who are interested in preserving their savings and don’t want to worry about earning back their losses buy fixed annuities for safety and guaranteed protection.

Please do not hesitate to contact us for further information. 

From: ASKKIM []
Sent: Tuesday, March 11, 2008 5:43 PM
Subject: Re: Today Show Response

Dear Ms. O'Brien,

Thank you very much for your e-mail. Virginia LaValley actually had an equity-indexed annuity. The annuity she purchased had a 15-year surrender period, which would have lasted until Virginia reached age 91. The surrender charge was 19% in the first year. In her case, I was specifically referring to a surrender charge -- not a maturity date. The Florida Department of Financial Services investigated and found that the same salesperson had sold similar annuities with long surrender periods to several seniors in their 70s and 80s. The regulators took away his license and helped the families get their money back. As you mention, other types of annuities may have been appropriate for her. But not the particular one she was sold.

 The Today Show segment was based on an article I wrote for the January issue of Kiplinger's Personal Finance Magazine, which goes into a lot more detail about Virginia LaValley's annuity and the difference between immediate and deferred annuities. Here is a link to that article:

I hope this helps clarify some of the issues you had mentioned. Thanks again for contacting me. I'm always looking for good resources and hope to have an opportunity to work with you next time I write about fixed annuities. I also hope you'll add me to your press list for press releases and other resources, or whenever you come across topics that might interest Kiplinger's readers. The best way to reach me is at



Kim Lankford, Kiplinger's

-----"Kim O'Brien" <> wrote: -----

To: <>
From: "Kim O'Brien" <>
Date: 03/12/2008 08:17AM
Subject: Today Show Response

Kim – thank you for the clarification and taking time to respond.  NAFA agrees that unsuitable sales practices need to be eradicated from our industry.  We have initiated a Task Force on Market Conduct that will identify and address unsuitable sales practices for fixed annuities and our goal is to work with the state regulators to implement the Task Force recommendations.  We are in contact with Roxanne Rehm at the FDFS and will consult with her to get more information and input for the Task Force.  NAFA is delighted to put you on our mailing list for press releases and press-related information.  Since you’ve been generous enough to respond, we hope you’ll indulge one more comment. 

We appreciate that you agree other annuities (whether they be deferred - indexed-rate or declare rate - or immediate annuities) may have been appropriate for Virginia LaValley.  NAFA knows that to be true.  However, it is troubling that The Today Show story described the promise of 12% returns as unsuitable sales practices and persons but chose to describe Virginia LaValley’s sale as unsuitable annuities.  This drives the audience to conclude that annuities in general are unsuitable or that all longer-period annuities are unsuitable for everyone of a certain age class.  Because the story didn’t explore or identify suitable annuities many older individuals will conclude that annuities are unsuitable, period.  NAFA does not agree with that over-generalization classifying all products or all individuals of a specific age.  There are also many older adults who buy longer-period annuities to protect their money from negative market returns, or to access free withdrawal features to subsidize income, or to protect the wealth they want to transfer to heirs, or to defer their decision to take the guaranteed income until its needed or at a targeted date – in essence as insurance against living too long.  There are a multitude of case studies to be found where these very suitable sales stories can be told.  Apparently The Today Show story found that both the 12%-return promise and the 15-year surrender period were bad sales.  NAFA would encourage them both to be characterized as such. 


Kim, we also understand that you were just part of the story and have copied The Today Show and Ms. Lieberman. 




Kim, too!

Kim O'Brien
Executive Director
2300 E Kensington Blvd
Milwaukee, WI 53211

415-946-3532 (fax)

NAFA * 2300 E. Kensington Blvd * Milwaukee, WI 53211 * 888-884-NAFA
NAFA is the National Association for Fixed Annuities. NAFA was created to foster a better understanding of all fixed annuities, regardless of interest creditin strategies. It is the only independent, non-profit organization dedicated solely to the promotion and preservation of these unique products. Permission to distribute and/or reproduce this document for NAFA members may be given upon request. Any unauthorized distribution is strictly prohibited.

Last Updated: 3/13/2008 7:52:00 AM