If you are over 60 and nearing retirement, the question of whether you should purchase an annuity as part of your retirement savings plan is likely to come up. Insurance agents and advisors, who stand to make a commission on any sale, promote annuities as important retirement savings vehicles. Or you may have an existing annuity that an agent suggests you replace with a “better” one. Be cautious whether you’re a first-time buyer or you’re considering replacement of an existing policy. 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.
We at Evans Law Firm represent clients, especially seniors, who have lost money on surrenders and replacements of annuities or from high commissions and fees on new or existing contracts. There are significant downsides with these complicated investments especially for seniors and agents and advisors often prey on seniors in marketing annuities. If you or a loved one has suffered a loss from an unsuitable annuity, surrender and/or replacement of an existing annuity, or other form of financial elder abuse in San Francisco or elsewhere in California, call the Evans Law Firm at (415)441-8669 and we can help. Below we list several important considerations when deciding on an annuity purchase or replacement.
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. You can also take advantage of tax-deferred retirement savings by contributing to IRAs and 401(k) plans without sinking your money in an annuity.
Remember also that annuities can be expensive in terms of the benefits they provide. Here are just some of the costs:
- 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 14% 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 hefty surrender charges. This is especially dangerous for seniors who may need their money before their policy matures. Also, agents will entice seniors to replace an existing annuity with a new one. As we mentioned above, 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
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 San Francisco or elsewhere in California, contact Ingrid Evans and the other Evans Law Firm annuity attorneys at (415) 441-8669, or by email at <a href=”mailto:firstname.lastname@example.org”>email@example.com</a>. 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.
 We do not offer investment or tax advice.