The Wall Street Journal reports that an independent insurance agent was ordered to spend 90 days in jail for selling an "indexed" annuity to an 83-year-old woman who prosecutors alleged had shown signs of dementia. Annuity Case Chills Insurance Agents focuses on the impact the ruling is having on the industry.
The case underlines authorities' continuing discomfort with "indexed" annuities, savings products that pay interest tied to the performance of stock- and bond-market indexes. Insurers guarantee that buyers won't lose any of their principal but in return charge sometimes-steep penalties if investors withdraw their money early, for periods that can stretch beyond a decade.
I'm not a fan of indexed annuities. The product is too complex and opaque. However, the article reminded me of a much more troubling trend: Older people and their money. It's difficult to figure out how to protect older people when they're independent and competent in many aspects of their lives, yet they're easily overwhelmed and taken advantage of when it comes to financial products. The wishes of competent older people should be heeded and respected. Yet subtle signs of deterioration show up early with money, a concern powerfully illustrated in this New York Times article, Money Woes Can Be Early Clue to Alzheimer's. How can we protect their finances of the elderly without taking away their independence?
There are no easy answers. Finding the right balance will be one of the biggest struggles in personal finance over the next several decades with the aging of the population. The law, regulators, financial advisors, and other major financial players will all have to change and adapt.