You have an investment/retirement annuity through a broker with a life insurance company in which you have payed 10% of your salary for the past 4 years. The company you are working for is starting to do very badly and cannot pay you on time or in full and you start missing payments.

The broker contacts you and says that you are incurring penalties and if you default on more payments you will lose the annuity.


What is the best option in this scenario?

  • Should you cancel the annuity and then maybe get something out of it? (I don't know how annuities work it's all smoke and mirrors to me, as far I know you get nothing if you do this)
  • Keep defaulting and hope that the company does better in a few months and then continue with full payments? What is the consequence of doing this? (will they allow you to pay the missed payments back later)
  • Any other, better solution that you can think of? (I'm not a finance expert)


  • 3
    It would really depend on what your contract with the life insurance provider says. Also, fyi if your employer misses multiple paycheques, it's time to leave. Mar 24, 2015 at 14:27
  • 1
    which country? btw this is heading into the legal Q area
    – Pepone
    Mar 24, 2015 at 15:09

1 Answer 1


I don't know how annuities work it's all smoke and mirrors to me.

This is a huge red flag to me. I would ask the agent what the penalty is to cancel this contract, and see ho much you can get back. If done right, you should be able to transfer these funds to an IRA or other pretax account.

To be clear, I'd make a similar remark if you said your were in a S&P ETF or any investment you don't understand. "Appropriate investment" means little if the investor has no understanding of what they are buying.

Update in repose to comments -

  • Talk to the broker to understand your options
  • Educate yourself to understand what this is. If the product appeals to you, and you are able to make the required payments, do so.
  • Make this decision in the context of the larger picture, your employment seems at risk. Putting money into an investment that's tough to pull out may not be a good idea, but only you know the rest of your situation.
  • Don't be so harsh on the OP. Most people don't understand how annuities work; they are looking only at the guaranteed payoff. Whether the insurance company selling the product will still be around to make the promised payments 35 years down the road is not thought about at all. It's like the "lifetime warranty" on a consumer product: I always wonder, is it my lifetime or the product's lifetime that is meant? Most likely the latter; when the doohickey breaks, its lifetime is over and so the warranty no longer applies.... Mar 24, 2015 at 22:49
  • @DilipSarwate - Sorry if I came off that way. In my opinion, one should never invest in what they don't quite understand. I think that's a good way to avoid frauds such as Madoff, at the risk of missing out on a good investment that is also not understood. What you actually caught was my visceral response to annuities which are sold, not bought. But still, in this case I hide behind the veil of "don't buy it if you don't understand it." And hope I did not offend the OP. Mar 24, 2015 at 23:08
  • @JoeTaxpayer Nah, you didn't offend :-) but you also didn't really answer the question either (to my expectation). I was hoping from the incompetence statement that someone would explain them a bit also; however, from your answer and the comments I can conclude that the annuities are highly governed by the contract rather that general rules which define "annuities", which is really interesting :-) and would explain your visceral feelings toward them.
    – Barnstokkr
    Mar 25, 2015 at 6:32
  • @JoeTaxpayer I think this is good advice not just for this scenario but probably for all investments. So the annuity in question's policy states that it cannot be canceled with out breach of contract and losing everything and missing 3 payments in 5 years also count toward breach of contract :P I am starting not to like annuities. Thanks for the answer!
    – Barnstokkr
    Mar 25, 2015 at 14:58
  • Sorry? You lose all your deposits? 40% (total) of a year's salary? I am speechless. I think you and you coworkers have a lawsuit on your hands. Mar 25, 2015 at 16:55

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