ATTORNEY NEWSLETTER
Think Twice Before Buying an Annuity
If you are over 60 and nearing retirement, you may be losing sleep over whether you’ll have enough income for your retirement years from your combination of pension benefits, Social Security, and personal retirement savings. Insurance agents and advisors, who stand to make a commission on any sale, may try and convince you to liquidate some or all of those savings and purchase an annuity for additional income. Be cautious. Ultimately, the decision on whether to buy an annuity is yours alone but make sure you understand how they work and get a second opinion before any purchase or surrender/replacement, including from your tax advisor.
Annuities tie up your money for years and are virtually irreversible unless you pay a steep surrender penalty to get your money back. Promises of guaranteed income sound good, but the price is dear; if you face an emergency down the road and your personal savings are tied up in an annuity, you may face a big surrender charge, and probably a tax bill, in order to get out.
The Alameda County and California annuity and financial elder abuse attorneys at Evans Law Firm, Inc. represent clients, especially seniors, who have lost money on surrenders of annuities or from high commissions and fees on new or existing contracts.[1] There are significant downsides with these complicated investments especially for seniors and agents and advisors often prey on seniors in marketing them. If you or a loved one has suffered a loss from a surrender and/or replacement of an existing annuity, or other form of financial elder abuse in Alameda County or elsewhere in California, call Evans Law Firm, Inc. at (415)441-8669 and we can help.
Tying Up Savings and Hidden Costs
Whenever considering an annuity, remember that you already own one in the form of your Social Security benefit. You can always find out what your benefit is estimated to be by asking the Social Security Administration for a statement of your benefits. You may also have a pension where you work and that is another annuity you already hold. IRAs and 401(k) plans are also tax deferred savings vehicles and you may be able to increase your contributions to those in order to create a nest egg for retirement.
Annuities are expensive in terms of the benefits they provide. Here are just some of the costs:
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- Commissions. Annuities are insurance contracts and, like other forms of insurance, pay commissions to the selling agent. Commissions are paid out upfront and are substantial on life insurance and annuities. It takes a long time – and a healthy return – to recoup that upfront money.
- Annual contract fees can run high as well. Make sure you know all the fees you’ll be paying.
- Investment management fees. In variable and fixed indexed annuities your money will be held in separate mutual fund subaccounts. These subaccounts charge fees too, not always disclosed.
- Optional rider fees for guaranteed income for life or enhanced death benefits. These fees can accumulate fast and significantly erode any return.
- Withdrawal or surrender charges. Surrender charges can be as high as 15% and last for up to ten years or more
With any annuity, your money is tied up for a long time and any early withdrawal is subject to surrender charges. This is especially dangerous for seniors who may need their money before their policy matures. If you already own an annuity, agents may try and entice you to replace it with a new – and in their words “better” – one. Any replacement (also known as twisting, switching or “churning”) can be costly. You may incur steep surrender charges when surrendering your existing contract and may incur an unexpected tax liability. We at Evans Law Firm have seen policyholders hit with big tax bills on replacements. Always seek the advice of an advisor who does not stand to gain from any purchase and always consult your tax advisor. There may be significant tax consequences for replacements, rollovers, purchases, and withdrawals.
Some of the major annuity and life insurance providers in California are listed below. We are not in any way suggesting these carriers have done anything wrong. Rather, the list is provided solely for our readers’ reference.
Allianz Life Insurance Company of North America
Allstate Life Insurance Company
American Equity Investment Life Holding Company
American General Life Insurance Company
American National Life Insurance Company
Ameriprise Financial/RiverSource Life Insurance Company
Athene Annuity and Life Company
AXA Equitable Life Insurance Company
Bankers Life Insurance and Casualty Company
EquiTrust Life Insurance Company
Fidelity & Guaranty Life Insurance Company
Forethought Life Insurance Company/Global Atlantic Financial Group
Genworth Life Insurance Company
Global Atlantic Financial Group/Forethought Life Insurance Company
Guardian Life Insurance Company
Guggenheim Partners/Security Benefit Life Insurance Company
ING USA Annuity and Life Insurance Company
Jackson National Life Insurance Company
John Hancock Life Insurance Company
Life Insurance of the SouthWest/National Life Group
Lincoln Financial Group/The Lincoln National Life Insurance Company
MassMutual/Massachusetts Mutual Life Insurance Company
MetLife/Metropolitan Life Insurance Company
Midland National Life Insurance Company
Mutual of Omaha/United of Omaha Life Insurance Company
National Life Group/Life Insurance of the SouthWest
New York Life Insurance Company
Northwestern Mutual Life Insurance Company
Pacific Life Insurance Company
Principal Life Insurance Company
Pruco/Prudential Life Insurance Company
RiverSource Life Insurance Company/Ameriprise Financial
Security Benefit Life Insurance Company/Guggenheim Partners
Symetra Life Insurance Company
Transamerica Life Insurance Company
United of Omaha Life Insurance Company/Mutual of Omaha
Unum Life Insurance Company of America
Voya/Reliastar Life Insurance Company
Contact Us
If you or a loved one is over 60 and lives in California and has suffered loss on an unsuitable annuity, annuity replacement, or paid surrender charges on a deferred annuity or any other annuity or has been the victim of financial elder abuse in Alameda County or elsewhere in California, contact Ingrid Evans and the other Evans Law Firm annuity and financial elder abuse attorneys at (415) 441-8669, or by email at <a href=”mailto:info@evanslaw.com”>info@evanslaw.com</a>. Our attorneys have experience with complex financial contracts and large insurance companies. We can help guide your case through a jury trial or toward an equitable settlement. We handle cases involving financial elder abuse, qui tam and whistleblower law, whole, indexed universal and universal life insurance, and indexed, variable, and fixed annuities.
[1] We do not offer investment or tax advice.
