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Aug 12, 2021 by |

San Mateo County Annuity and Financial Elder Abuse Attorneys: The Risks And Dangers of Indexed Annuities For Seniors

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  • Vesting Schedule Earnings diminish when withdrawn early.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.

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