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Aug 4, 2017 by |

California Annuity and Life Insurance Attorney: Investment Only Variable Annuities


IOVAs: Investment Only Variable Annuities

What are IOVAs and How Do They Work?

Tax deferral is the key to successful retirement savings. IRAs, 401(k)s, SEPs and the like offer deferral but annual contribution limits are relatively low for high earners. Annuity carriers offer another possibility. Investment Only Variable Annuities (IOVAs) are marketed as tax deferred investments for earners maxed out on conventional retirement plan contributions. Agents sell IOVAs as a low fee, commission free, no surrender charge variety of variable annuities. We at Evans Law Firm have years of experience with variable annuities and suggest a closer look. If you or a loved one have been sold an unsuitable annuity, call the experienced financial elder abuse and annuities lawyers today at Evans Law Firm, Inc. (415)441-8669 and we may be able to help. We accept annuity cases in the State of California

So, what do you find when you dig more deeply into IOVAs? For one thing, IOVAs are still illiquid investments. Even though there are often no or very low surrender charges, the IRS imposes a 10 percent penalty on funds withdrawn before the policyholder reaches age 59 ½. That penalty is on top of the tax itself, so that in total the policyholder may have to turn over half the amount withdrawn to the IRS (not including State taxes) on any withdrawal before age 59 ½! Be extremely careful in over-committing to these kind of illiquid investments. Depending on your age, it may be many years before you can access your money penalty-free.

Also be sure to consider your estate planning objectives when looking at IOVAs. Traditionally, carriers do not issue Death Benefit riders for these contracts. That is starting to change but bear in mind that there will be a fee for the rider and that fee will cut into your return from the day you take out the death benefit coverage. Also death benefits expire once you annuitize, or start receiving income payments. Studies show that a very small percentage of annuities, fewer than 10%, ever actually pay the death benefit because most contracts are annuitized before the owner dies. All the money paid out in fees for the coverage are lost from your estate.

Some of the major annuity and life insurance providers in California are:

Contact Us

If you or a loved one been sold an unsuitable annuity please contact the Evans Law Firm financial elder abuse and annuity and life insurance attorneys at (415) 441-8669, or by email at Our attorneys have experience with complex financial contracts and large insurance companies. We can help guide your case through a FINRA arbitration, jury trial or toward an equitable settlement. We handle cases involving physical and financial elder abuse, qui tam and whistleblower law, nursing home abuse, whole life insurance and universal life insurance, and indexed, variable, and fixed annuities.

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