Another reason to avoid annuities.

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This article was first posted July 1, 2016.

In addition to very high fees and costs -- even for a so-called low-cost immediate life life annuity, you also need to be worried about whether your insurance salesman is scamming you. Here's the latest in Federal enforcement actions against insurance companies that are defrauding their customers.

MetLife to pay $25 million for annuity sales violations: FINRA
http://www.reuters.com/article/us-metlife-finra-idUSKCN0XU1MZ

The sanction includes a $20 million fine and $5 million to be paid to customers, the Financial Industry Regulatory Authority, or FINRA, said. The fine marks FINRA’s largest related to variable annuities, FINRA said.

“MetLife fully cooperated with the FINRA investigation and we are pleased to put this matter behind us,” a MetLife spokesman said. The company, which neither admitted nor denied FINRA’s charges, has set aside funds to pay the fine, he said.

MetLife’s “annuity switching” business generated at least $152 million in commissions between 2009 and 2014, FINRA said.

MetLife terminated Williamsville, N.Y.-based brokers, Christopher Birli and Patrick Chapin, in 2012, according to regulatory filings. The two had advised State University of New York employees who participated in the school’s retirement plan, according a 2014 FINRA complaint.

Both brokers agreed to be permanently barred from the industry without admitting to nor denying FINRA’s allegations, according to regulatory filings.

So Metlife's annuity switching scam generated $152 million in commissions but only $5 million was actually returned to customers and Metlife paid a $20 million fine to the feckless regulators. These crooks got to keep the other $127 million? And the brokers that were stealing from their customers were never brought to trial, let alone convicted or sent to prison?

As Donald Trump would ask, "Who's negotiating these deals?"

Resources for more information

Rethinking Retirement Sustainable Withdrawal Rates for New Retirees in 2015, Wade D. Pfau & Wade Dokken. -- You'll have to save a lot more for retirement if a financial advisor and the mutual fund managers he recommends are taking a lot of your wealth in excessive fees. Pfau and Dokken's "research" assume a 1.67% skim rate for stocks, 1.60% for bonds. No wonder our beleaguered retiree is only left with 2%.

Vanguard's fees are costing me a new car? (2013) You'll have to save a lot more for retirement if a financial advisor and the mutual fund managers he recommends are taking a lot of your wealth in excessive fees.

The Federal Thrift Savings Plan: A Model for the Private Sector? (2008) Lobbying arm of the mutual fund industry complains that it's not fair to compare their products to the low costs of the TSP.

ExxonMobil Savings Plan Brochure (PDF) -- Fund expense ratios and 401k mgmt fee on page 17 of document. Annual fees ranges from 2 basis points for the bond fund to 6 basis points for the international equity fund.

USA Today -- Are fees draining your 401(k) retirement savings? (Aug 25, 2009) Article notes that some small company 401(k) plans can have annual fees & expenses as high as 4.8% of assets.