Dear Mr. Berko:  I recently received $205,000 when the buyer of my house paid off his mortgage balance 10 years sooner than I expected. I was going to put the money in a 5 percent certificate of deposit, but my broker suggested that I invest half of the amount in a MetLife Inc. variable annuity, which also pays 5 percent and also offers possible growth in value. But I’ve heard so much bad news and read so many bad articles about annuities that I’m afraid to buy one. Please tell me why there is so much negative publicity about these annuities.  H.G., Joliet, Ill.

Dear H.G.:  Yes, the annuity business is getting a lot of bad press, and much of it is deserved. Many so-called financial experts, especially those with fancy initials after their names — CAA (certified annuity adviser) or CSFA (certified senior financial adviser) or CIS (chartered income specialist) and myriad other ridiculous designations — sell annuities that I call “cream of the crap.” They have the highest commission payout to the salesperson (cream) and the annual expenses plus contract clauses and performance (crap) really sock it to the client.  These annuities, like rotten apples, spoil the barrel. The salesperson receives a 12 percent to 15 percent commission when you buy the product. The annuity company charges its clients as much as 4 percent to 7 percent per year for expenses and management fees, the selling broker gets a continuing annual fee (as much as 1 percent) for every year you own that annuity, and the annuities’ mutual funds contain some of worst-managed and cheapest funds in the business. The early-exit penalties are enormous and never seem to disappear, the small-print clauses in the annuity contracts harm the client, the issuing insurance company is poorly rated, the issuing company takes weeks to send requested checks, the issuing company won’t respond in a timely manner to address or name changes, the statements are difficult to read, and those policies are designed so clients can never get their original investments back.  So when considering an annuity, stay with well-known names. Equitable Group Inc., the Hartford Financial Services Group, MetLife, ING Groep, Ohio National Life Insurance Co., Allianz, New York Life, Phoenix, MassMutual Life Insurance, Lincoln Benefit Life, Jefferson Pilot Corp., TransAmerica, Mutual of New York Life Insurance and SunAmerica are among the best. And MetLife (MET), in our opinion, is one of the “best of the best.”  I strongly recommend that you follow your broker’s advice, because the MET annuity might be one of the best long-term investments you will own.  Certainly you know that MET is among the better-rated insurers. It has excellent mutual funds from which to choose, its fees are quite reasonable, its back-office people are superb and MET’s statements are easy to read. When you purchase a MET variable annuity, you can elect to receive a 6 percent bonus (invest $100,000 and MET will add $6,000 to your $100,000 for a 0.60 basis point annual fee) with a guaranteed 5 percent annual income payout on $106,000, or $5,300 a year.  If a year from now the market grows your annuity to $120,000, MET will pay you 5 percent of $120,000. If three years from now your policy grows to $140,000, MET guarantees you 5 percent of $140,000, or $7,000 income a year. It can never be less. I don’t know of another variable policy with that provision and I’m delighted your broker has recommended MET to you.  Of course, you can get all your money back; every red cent, silver quarter and green dollar. If your MET variable is worth $1,000 or $5,000 or $18,000 because of a catastrophic year, MetLife, on the 10th anniversary of the policy, will cut you a check for your initial investment and will do it lickety-split. So unlike many other annuities, you don’t have to annuitize (take monthly, quarterly or annual income) to get whole again.   So give your broker a gold star, because his MetLife variable annuity recommendation is one of the best on the Street. Buy it, sit back and let MET take the worry and the risk while you take the guarantee.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.  © Copley News Service