Resist Fear Tactics Used To Sell Annuities
Sales Commissions Drive The Annuity Industry
Consider Other Tax-Deferred Strategies
Deferring taxes on retirement savings is a key part of any retirements planning. Tax deferrals can be achieved through direct investment of IRAs or 401ks in mutual funds or ETFs. We do not recommend deferred annuities to meet this objective because (i) deferred annuities generate large, upfront sales commissions; (ii) cap your return at a level lower than the your chosen index’s performance; and, most importantly, (iii) penalize withdrawals when you need your money back. If a senior has his or her money tied up in a deferred annuities and needs it back for an emergency or because care expenses have risen, the annuity carrier will impose a penalty on the withdrawal. If the same money had been invested in a tax-deferred mutual fund investment (as an IRA account or 401k), you would not be penalized if you needed your money back. Evans Law Firm, Inc. recommends seniors avoid deferred annuities because 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 San Francisco, Alameda 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.
Understanding Withdrawal Penalties
Withdrawal or surrender charges can really destroy a senior’s savings put into an annuity if he or she needs to access their money. The charge can be as high as 15% of the amount you need to withdraw and the surrender period may last ten years or more. It really is impossible to look ahead so many years and be confident you will not need your money. Circumstances change and can change rapidly for an older person who suddenly needs greater care at a big cost If the same amount of savings you invested in an annuity had been in a direct mutual fund, you would not be penalized if you needed your money or decided to switch investments. Carriers lock you into deferred annuities with these penalties and reduce your options. Even if you’re one of the fortunate who does not need to access their money and you stay in the contract, the fees, caps, and participation limits set by the insurer will 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.
Commissions, Fees and Caps
Upfront and annual costs also work against you with deferred annuities. 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. Deferred annuity contracts like indexed or fixed indexed annuities include administrative fees, mortality (or insurance) expense fees, rider fees (for enhanced policy features like income “guarantees” or death benefits), and subaccount fees, charged against the return you are credited with for the chosen index. As if the accumulated fees weren’t bad enough, your return will be subject to cap and participation rates. A cap sets the maximum return you can see, so even if you chosen fund inc4ases 15% over a one-year period, for example, your contract may cap your return at 7 or * % and you never share in the greater growth. You also will never see 100% of the index’s growth because of “participation rates” set by the carrier which typically limit you to a 80-90% participation in the growth of the fund. Note that caps and participation rates are cumulative so you really can lose out even when your chosen index performs well.
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:firstname.lastname@example.org”>email@example.com</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.