ATTORNEY NEWSLETTER
Not The Same As Index Fund Investments
High Sales Commissions, Fees And Withdrawal Penalties
Annuities Are Not Insure Investments
Whenever an insurance agent approaches you with a deferred annuity, like an indexed annuity dig a little deeper to understand how these indexed annuities operate in real life. Indexed annuities are sold as offering the policyholder a return reflecting the return on a chosen index, such as the S&P 500. But indexed annuities do not operate as straight investments in index finds do, as described in more detail below. Evans Law Firm, Inc. recommends against any form of deferred annuities for senior consumers, including indexed annuities. Learn more about these complicated insurance products before you let an agent sell you one. The U.S. Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) provide some resources to help senior consumers better understand these products. We at Evans Law Firm, Inc have seen senior consumers harmed by these complicated products and want to share more information with you about how these contracts work. We can represent you if you’re over 60 and live here in San Mateo County or elsewhere in California and have suffered a loss due to cancellation, replacement, full or partial surrender, or high fees connected with an indexed annuity. Call us today at 415-441-8669 (or toll free at 1-888-50EVANS) for a free review of your policy.
Pitfalls of Indexed Annuities
- 10% IRS Penalty Withdrawing income before the age of 59.5 results in a 10% IRS tax penalty. Obviously a 10% penalty eats into earning substantially and should be avoided at all costs. Consequently, index annuities are not suitable substitutes for CDs or mutual funds outside a retirement plan. If you’re seeking per-retirement wealth, look elsewhere.
- Not Considered a Capital Gain Although tax-deferred at first, income is eventually taxed at ordinary rates, unlike stocks.
- Administration Fees Like mutual funds, some index annuities charge a 1-3% annual management fee.
- Withdrawal Fees Withdrawals exceeding the annual allowance incur an insurance company penalty.
- Vesting Schedule Earnings diminish when withdrawn early. A vesting schedule determines by exactly how much.
Using Resources To Understand More[1]
Both the SEC and FINRA have recently focused attention on indexed annuity products and the takeaway from both agencies is that senior consumers should:
- Understand the complexity of these products. Indexed annuities are complicated insurance policies, not straight fund investments.
- Be mindful of surrender penalties, which can last anywhere from 5-15 years and be as high as 15% on money withdrawn.
- Understand that your return on an indexed annuity will be capped at a set rate lower than the true return on your chosen index, be subject to a “participation rate” that further limits your return to 80-90% of an index return, and subject to administrative and subaccount fees that will further erode your return.
- Understand the indexed annuities can expose investors to investment loss. Annuities are insurance products and not bank investments insured by the FDIC – even if it’s a bank selling you the indexed annuities. They are not insured like CDs.
- Understand how the return on the proposed indexed annuity is calculated and the extent to which price declines in the index can affect the performance of the indexed annuity.
- Understand that dividends on the stocks in your chosen fund are excluded so your gains, if any, will not include the benefit of dividends as your return on a direct investment in the selected fund would.
How Evans Law Firm Can Help You
We have experience representing senior policyholders who have lost money on surrenders, cancellations, replacements or exchanges of indexed annuities or as a result of the fees or penalties imposed under the contracts. We do not provide investment advice or tax advice and urge you always to seek a second opinion from an investment professional and consult your tax advisor before letting an agent sell you any type of deferred annuity, including an indexed contract. If you have already purchased a policy, and experienced a financial loss as a senior that’s where our attorneys may be able to help.
Contact Us
Ingrid M. Evans has years of experience representing senior consumers against insurance agents and carriers who have sold unsuitable policies, failed to disclose important information or otherwise caused senior consumers to lose money on deferred annuities. If you are over age 60, live here in San Mateo County or elsewhere in California and have lost money as the result of an annuity transaction or surrender, you can reach Ingrid at (415) 441-8669 (or toll free at 1-888-50EVANS) or by email at <ahref=”mailto:info@evanslaw.com”>info@evanslaw.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
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
PacLife
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.
[1] You can read the SEC Bulletin on indexed annuities here: https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_indexedannuities. FINRA offers information on indexed annuities here: https://www.finra.org/investors/insights/complicated-risks-and-rewards-indexed-annuities.
