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Jul 14, 2021 by |

San Francisco and Alameda County Annuity And Financial Elder Abuse Attorneys: Why Deferred Annuities Are A Bad Idea For Seniors


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.

Contact Us

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=””></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

Athene USA

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.

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"I contacted Attorney Ingrid Evans for advice about a financial elder abuse case. She was extremely knowledgeable, bright and informative. I highly recommend her. I am an attorney myself, and know when I am talking to a another excellent attorney."
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