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<p>About two years ago Esther Hanstein of Scranton noticed her investment portfolio was looking anemic and decided it needed an overhaul.</p><p>At age 74, Hanstein had limited knowledge of investing. She had never done hands-on trading in stocks. Her experience had pretty much been limited to choosing mutual funds for her 401(k). But she did keep an eye on the global economy, and her then-broker had rolled over some of her funds into oil and gas and European bonds.</p><p>By 2014, with oil prices slipping and Greece teetering on the edge of default, Hanstein had the jitters.</p><p>As she shopped for advice, a friend recommended a local broker-dealer for Centaurus Financial, Christian J. Stoltz of Kingston. Hanstein gave Stoltz a call, and in the fall of 2014, she says, they met to discuss her financial objectives.</p><p>&#8220;I didn&#8217;t want income because I&#8217;m still working,&#8221; explains Hanstein, adding that her foremost goal was to preserve her principal and stay ahead of inflation.</p><p>By July 2015, after several meetings with Stoltz, Hanstein had put most of her cash in annuities.</p><p>Simply put, you buy an annuity by making either a single payment or a series of payments to an insurance company, and in return, the company makes payments to you, either immediately or in the future.</p><p>Annuities are attractive to retirees because they offer a predictable income stream over a period of time, sometimes for life. As investments, however, they can be dicey. So dicey, in fact, that in 2014 Allianz Life Insurance Co. of North America agreed to a $251 million settlement to end two racketeering class actions accusing the company of luring 230,000 seniors into buying low-performing deferred annuities with draconian surrender charges and ridiculous fees.</p><p>Apparently, however, that didn&#8217;t change the company&#8217;s practices.</p><p>Hanstein purchased an Allianz Vision Variable Annuity in November, 2014. The cost was $52,880. She later took a $2,400 withdrawal and left the rest to keep growing.</p><p>In December 2014, Hanstein purchased Athene&#8217;s Balanced Choice Indexed Annuity, paying $96,402. No withdrawals.</p><p>Then in August, 2015, she purchased another Balanced Choice Indexed Annuity, this time paying $245,000. She later withdrew about $10,000.</p><p>So Hanstein plunked down $394,000 &#8212; about 75 percent of her liquid assets, she says &#8212; for three annuities, and withdrew about $12,400.</p><p>That should have left her with about $381,600, right?</p><p>Wrong.</p><p>If Hanstein wanted to cash out today, she&#8217;d get back roughly $338,000.</p><p>How&#8217;s that for preserving principal?</p><p>That&#8217;s right. After a little more than a year, cashing out would cost her about $43K &#8212; and not because of the recent stock market crash, but because that&#8217;s how annuities are generally designed. Most are complex instruments that promise high returns &#8212; years down the road &#8212; but are also loaded with administrative fees, mortality and expense risk charges, rider fees, contract maintenance fees, sales charges and underlying sub-account expenses, and written in mind-bending language that hardly anyone can understand.</p><p>Hanstein wonders why Stoltz &#8220;put me into these three annuities that I can&#8217;t get out of.&#8221;</p><p>&#8220;I wasn&#8217;t aware of all the penalties and charges,&#8221; she said. &#8220;I am floundering here. I could see my money trickling away.&#8221;</p><p>Stoltz, who splits a sales commission of about 7 percent or more with Centaurus Financial, says the annuities offer Hanstein the best bang for her buck and insists she knew what she was getting into. Still, he&#8217;s going to try to help her out.</p><p>&#8220;I&#8217;m trying to talk to the investment companies to see if we can reverse things, even if it&#8217;s not warranted,&#8221; he said.</p><p>Chris Wang, a financial analyst at Runnymede Capital in New Jersey, studies and blogs about annuities, believes they&#8217;re primarily designed to enrich the people who sell them. Older folks in particular, he says, should not fall for their sales pitch.</p><p>&#8220;The majority of 70-year-old people should be conservatively invested,&#8221; he advised. &#8220;If they had a portfolio of 30 percent equities and 70 percent bonds, they would have been down just 7 percent in 2008. This would have been followed by returns of 12 percent, 9 percent, 6 percent, 8 percent and 8 percent for a cumulative return of 39 percent from 2007 to 2013.&#8221;</p><p>He says investors should avoid what they don&#8217;t understand.</p><p>&#8220;Reading these annuity contracts gives me a headache,&#8221; Wang said. &#8220;And I&#8217;m a professional.&#8221;</p><style>
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<div class="metaInfo"><bylineMeta><p>Consumer Watchdog</p><p>Christine Young</p></bylineMeta></div><div class="metaInfo"><factboxMeta><p><strong>HERE FOR YOU</strong></p><p>Have you been wronged by a business? Have you been the victim of a scam? Our Consumer Watchdog is here to help. To reach our Consumer Watchdog, email ConsumerWatchdog@www.timesleader.com.</p></factboxMeta></div><div class="metaInfo"><shirttailMeta><p>Christine Young is the Times Leader&#8217;s Consumer Watchdog. She can be reached at ConsumerWatchdog@www.timesleader.com.. Her column appears weekly.</p></shirttailMeta></div>

Consumer Watchdog: Older investors should be wary of annuity sales pitches