Annuities Are Complicated Insurance Policies
Disadvantages For Seniors
Understand How Annuities Work Before You Are Sold One
Evans Law Firm, Inc. recommends seniors avoid deferred annuities because these insurance contracts are costly and complicated and expensive to get out of once you are in one. Tax deferrals can be achieved in other ways through direct investment of IRAs or 401ks in mutual funds or ETFs. Such direct investments do not penalize withdrawals as deferred annuities do through withdrawal (also known as surrender) charges. Under deferred annuities, if a senior needs his or her premium money back for an emergency or because care expenses have risen, any withdrawal will be subject to a sizeable withdrawal penalty. If the same amount of money had been invested in a similarly tax-deferred IRA or 401k mutual fund investment, the withdrawal would not have been subject to penalty by the fund operator. Here at Evans Law Firm, Inc., we have seen many seniors lose money on deferred annuities over our years representing victims of financial elder abuse. If you have already been sold an annuity and you’re over 60 and live in Los Angeles, Orange County or elsewhere in California and have suffered a loss due to cancellation, replacement, fees, or full or partial surrender of a deferred annuity, call us today at 415-441-8669 (or toll free at 1-888-50EVANS) for a free review of your policy.
Commissions And Contract Fees Erode Returns
Agents earn a significant sales commission every time they sell a deferred annuity. This commission can run as high as 10%. Commissions are paid “up front,” at the inception of the policy, and come directly out of your first premium payment. Marketing gimmicks like a “premium bonus” promise to repay you this commission money over time but these “premium bonuses” are essentially phantom amounts that you will most likely never see. The bonus is not an amount of money you can withdraw to pay yourself back for the commission outlay. If you surrender the contract to get your money back, or even make a partial surrender for only some of your money the “bonus” disappears. Deferred annuity contracts also include administrative fees, mortality (or insurance) expense fees, and rider fees (for enhanced policy features like income “guarantees” or death benefits). The indexes you select for investment of your premium dollars will also impose subaccount fees which are buried and charged against the return you are credited with for the chosen index. Sound complicated? It is, and the complexities invariably benefit the carrier, not you. Finally, your return will be subject to a cap and a participation rate both of which act to reduce any return that you otherwise could have received if you had just invested your money in the chosen index directly.
Surrender Charges And Costly Exchanges
Charges on withdrawals (surrenders) pose the greatest potential problem for seniors because those charges decrease withdrawals of your own money every time you need to access it. Surrender periods can last for ten years or more and can be as high as 15% of the amount you need to withdraw. If you had the same investment in a direct mutual fund, you would not be penalized if you decided down the road to switch investments. Deferred annuities however lock you into the contract with these prohibitive withdrawal penalties. On the other hand, if you do stay in the contract, the fees, caps, and participation limits collectively erode your return. We have seen policyholders see zero returns on substantial amounts of money over a one-year period; even a bank savings account producing some interest would have been better. Bank deposits moreover are insured up to $250,000; annuities are not insured investments. Whatever you do, when considering an annuity always consult a professional with nothing to gain from a sale before you buy and always consult your tax advisor because any decision regarding annuities has tax consequences. If an agent recommends replacing your existing contract, be extra careful. Those kinds of transactions can trigger large tax liabilities, incur surrender charges, wipe out “bonuses,” and reset the clock on your surrender penalty period under the new policy.
If you or a loved one has suffered loss on the surrender, termination or transfer of an annuity in Los Angeles, Orange County or elsewhere in California call Ingrid M. Evans at Evans Law Firm, Inc. at (415) 441-8669 (or toll free at 1-888-50EVANS) or by email at <ahref=”mailto:email@example.com”>firstname.lastname@example.org</a>.
Annuities and life insurance produce large sales commissions for brokers but are often inappropriate products for consumers, especially seniors. Leading providers and distributors of life insurance and fixed, variable and fixed indexed deferred annuities in California are listed below. We are not in any way suggesting that any of these carriers or distributors has done anything wrong. Rather, the list is provided solely as a reference for our readers.
AIG/American General Life Insurance Company
Allianz Life Insurance Company of North America
American Equity Investment Life Insurance Company
American General Life Insurance Company/AIG
American International Group, Inc. (AIG)
American National Life Insurance Company
Athene Annuity & Life Assurance Company
Athene Annuity and Life Company
Aviva Life Insurance Company
AXA Equitable Financial Services, LLC
AXA Equitable Life Insurance Company/AXA US
AXA Advisors, LLC
Brighthouse Financial, Inc./MetLife
EquiTrust Life Insurance Company
Fidelity & Guaranty Life Insurance Company
Genworth Financial, Inc.
Genworth Life and Annuity Insurance Company
Genworth Life Insurance Company
Guggenheim Partners, LLC
Guggenheim Partners/Security Benefit Life Insurance Company
ING USA Annuity and Life Insurance Company
Jackson National Life Insurance Company
John Hancock Life Insurance Company
Lincoln Benefit Life Company
Lincoln Financial Group
Massachusetts Mutual Life Insurance Company
Metlife/Metropolitan Life Insurance Company/Brighthouse Financial, Inc.
Minnesota Life Insurance Company
Nationwide Investor Services Corporation (NISC)
Nationwide Life and Annuity Insurance Company
Nationwide Life Insurance Company
New York Life Insurance Company
Northwestern Mutual Investment Services, LLC
Northwestern Mutual Life Insurance Company
Northwestern Mutual Wealth Management Company
Pacific Life & Annuity Company
Pacific Life Insurance Company
Security Benefit Corporation
Security Benefit Group, Inc.
Security Benefit Life Insurance Company/Guggenheim Partners
Security Investors, LLC
Security of Denver Life Insurance Company/Voya
Transamerica Life Insurance Company
Voya Financial Advisors
Voya/Reliastar Life Insurance Company
World Financial Group Insurance Agency, Inc.