Costly Withdrawal Charges And Contract Fees
Interest Crediting Rules Favor Carrier
Risk of Loss Of Principal
Deferred annuities are contracts where the policy holder makes an upfront premium payment in exchange from an income stream in years to come. The principle sounds simple enough but in fact deferred annuities, like fixed indexed annuities are extremely complicated insurance contracts sometimes running to 50-100 pages of technical language and actuarial tables. Evans Law Firm, Inc. generally recommends against certain types of deferred annuities for older consumers because these complex, expensive insurance policies may tie up a senior’s money for years and impose significant penalties if you need your money back. Also, the promise of the carrier to pay future income amounts is only as good as the carrier’s word; annuities are not insured deposits (like bank deposits) even if a banker sells you one. Sales and recommended surrenders and exchanges of deferred annuities to seniors may constitute financial elder abuse claims under Cal. Welf. & Inst. Code §§ 15610.30 (definition of financial elder abuse) and Cal. Ins. Code §10509 (suitability requirements for annuities). Questionable sales tactics, like unannounced home visits, “pretext” visits or falsified applications, are illegal. See, e.g., Cal. Ins. Code § 790 et seq. (Unfair Insurance Practices Act). If you are over 60, and live in Napa or elsewhere in California and would like us to review your annuity contract, call us today at 415-441-8669 (or toll free at 1-888-50EVANS) for a free review of your policy.
Downsides of Annuities
When you put a lump sum into an annuity, essentially you’re surrendering your money for the term of your contract. If you want to back out of the annuity and change how your money is invested or if you have an emergency and need your money back, you will pay a withdrawal penalty, known as a surrender charge. Sometimes the charge can be as high as 15% and the period over which the charges apply last for several years. You will also incur a tax liability and annuity withdrawals may be taxed at ordinary income tax rates not the lower capital gains rate.
Fees and Commissions
Broker fees (or sales commissions) and service fees can be high on certain forms of annuities. The reason brokers favor annuities is that they can make upwards of 10% in commission off the principal, which can mean a $10,000 payday on a $100,000 annuity sale, with fees increasing the more the annuity is amended and customized through policy “enhancements” known as “riders.”.
Not Insured Investments
One final sticking point with annuities is that they’re primarily bought through insurance companies, which are not backed by the federal government in the same way that banks are. (Even if a bank rep is offering you the annuity it will not be an insured deposit like CDs or other bank deposits.) Because there is no FDIC insurance behind an annuity purchase, if the insurance company happens to fold, you risk losing everything you invested.
If you are over 60 and live in Napa or elsewhere in California and would like a free review of your policy contact 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:firstname.lastname@example.org”>email@example.com</a>.
Some significant issuers and distributors of 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. 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.