The Three-Legged Chicken of Investments: Why Guaranteed Products Aren't Always What They Seem

Have you heard the tale of a three-legged chicken? It serves as an apt metaphor for the "too good to be true" products marketed to unsuspecting investors. Recently, a client of mine was reminded of this tale when dealing with a complex Guaranteed Minimum Withdrawal Benefit (GMWB) variable annuity. Sold by a "friend" years ago, this annuity promised guaranteed income and stock market growth. Unfortunately, it turned out to be more of a cautionary tale than a golden goose.

Years later, the underlying investment value hadn't grown significantly. My client had been paying high annual fees—over 2%—which steadily eroded returns. When he wanted to move the account, he faced hefty surrender penalties, as high as 7%. Thankfully, we found a solution that helped him preserve his investment, but it underscored the dangers of chasing unrealistic guarantees.

For anyone considering "guaranteed" products, let me share a story about a chicken...

Convert (to a Roth IRA) Now, Before the Tax Man Cometh

Picture this: You're at the pearly gates of financial heaven, but instead of Saint Peter holding a ledger, you've got Uncle Sam with a calculator in his hand. Before you get in, he’s going to add up everything you owe. For those of you that have done a decent job of saving in your retirement accounts, the cost of entry may be a mighty cross to bear. But what if I told you there's a way to baptize now and avoid that hefty tax bill later?

ATX Portfolio Advisors, LLC is a State of Texas Registered Investment Advisory Company. 

Please consider the investment objectives, risks, charges, and expenses carefully before investing in Mutual Funds. The prospectus, which contains this and other information about the investment company, can be obtained directly from the Fund Company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

Asset Allocation and/or Diversification do not guarantee a profit or protect against a loss in a declining market.  They are methods used to help manage investment risk. 

ATX Portfolio Advisors, LLC does not offer legal or tax advice.  Please consult the appropriate professional.

Links to third-party web sites are provided as a convenience. ATX Portfolio Advisors, LLC does not endorse nor support the content of third-party sites. By clicking on a third-party link, you will leave this website where privacy and security policies may differ from those practiced by ATX Portfolio Advisors, LLC.

This site is published for residents of the United States only. Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all of services referenced on this site are available in every state and through every advisor listed. For additional information, please contact ATX Portfolio Advisors, LLC at info@atxadvisors.com.