The Ins and Outs of the Annuity
Who’s paying for your annuity?
If you own an annuity or are thinking or purchasing one, you probably know what’s supposed to happen with your money. You pay a lump sum up front, and the company you purchased it from guarantees you a small but steady rate of return while dolling your funds out to you over a long period of time. But you might start to wonder exactly where that return comes from. If the annuity is such a good deal for you, how can it also be a good deal for them? The answer to that question can be more tricky than you’d think.
Traditional Annuities vs. Modern Annuities
To begin with, there are more varieties of annuity than you might expect. Like Life Insurance or other financial products, there are dozens of varieties of annuities, such as whole like, deferred, variable, and indexed. This means that the answer to our question can change between products that may otherwise seem very similar. But we can group annuities into two basic camps based on how they’re funded. Old fashioned annuities tend to offer middle of the road returns by investing in rock solid treasury notes and other guaranteed sources of returns. More recently, companies have begun selling annuities that get their rates from tracking a financial index like the Dow Jones or S&P 500. Their rates, far from being solid, tend to fluctuate with the stock market.
What to know about indexed annuities
These annuities are called indexed annuities, and they are somewhat controversial products, in part because they tend to underperform more traditional annuities while being advertised as a more profitable alternative. In addition, if your annuity is doing well, the company that sold it to you often takes a cut off the top, and you may never see a portion of your returns. While it’s intended to offer the stability of an annuity with the high returns of the stock market, too often it has the unpredictability of the stock market and returns lower than an annuity.
So Who’s Paying for the Annuity?
In the end, it’s often the case that you’re the one paying the most for your annuity. To stay profitable, companies sometimes charge hidden fees and penalties, skim off your earnings, and use your money to keep themselves profitable. Indexed annuities make that easier for them, and if a product is designed to benefit the seller more than the buyer, it might be worth looking for a better way to invest your money.
Major Sellers of Annuities
- Transamerica Life Insurance Company
- John Hancock Life Insurance Company
- Prudential Life Insurance Company
- Metlife Investors USA Insurance Company
- Genworth Life Insurance Company
- ING USA Annuity and Life Insurance Company/Voya Financial
- Lincoln Benefit Life Company
- Metropolitan Life Insurance Company
- Unum Life Insurance Company of America
- Reliastar Life Insurance Company
If you feel that you may have been the victim of an improperly administered or sold annuity or other financial product, contact the Evans Law Firm at (415) 441-8669, or by email at firstname.lastname@example.org. Our firm handles annuity, insurance, banking, and investment fraud, qui tam and whistleblower cases, financial and physical elder abuse, and nursing home and healthcare fraud.