The Government Accountability Office is supposed to be a government watchdog: keeping an eye on public funds and looking out for self-dealing, all while making sure that the taxpayers are getting a fair shake.
That’s why it’s more than a little disconcerting that the GAO is now promoting annuities as a retirement tool. Over at TheStreet.com, Gary Weiss reports on a recent GAO report that says, “Experts we interviewed tended to recommend that retirees draw down their savings strategically and systematically and that they convert a portion of their savings into an income annuity to cover necessary expenses.”
Of course the footnote mentions that “our selection of experts did not provide a statistically representative sample of all financial experts.”
But here’s the deal: Annuities can be a useful savings vehicle in some scenarios. But those scenarios are so rare that they’re barely worth talking about.
Suze Orman’s website has one of the best primers on annuities out there, and variable annuities are right up there with whole life insurance as one of the worst financial products in the world. As Suze put it in an interview with Money, “I hate them with a passion. … I think variable annuities exist for one reason only: to make money for the financial advisers who sell them.”
The GAO appears to have bought into the arguments of financial planners who make a living selling these products on commission. Hopefully they’ll look into this issue more deeply and issue a clarification.