Some insurance companies have allegedly not been able to make their annuitization obligations to people who purchased variable annuities. Variable annuities are sold as a product that will guarantee a lifetime stream of income for investors. Investors purchase the annuity, and after a certain amount of money is invested in the annuity (which can be put in immediately or over a period of time), the investor then receives periodic payments from the annuity. If the companies backing the annuities cannot meet their financial obligations, however, the investors may not ever see that stream of income.
When the insurance companies cannot meet their financial obligations, they may request that the investor put more money into the annuity before it is annuitized (cashed out) or they may request the investor sign a document promising to never annuitize the investment.
The problem is that many retirees and people nearing retirement count on that guaranteed stream of income for their retirement years. They plan their finances based on the money they expect from their variable annuities.
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The risks and fees associated with an investment are vital information for an investor to have. And if a company promises a guaranteed lifetime stream of income and fails to deliver, it could be violating a contract with the investor, leaving the investor to decide what to do.