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Mar 26, 2021 by |

Santa Clara County Financial Elder Abuse Attorney: What Senior Consumers Need To Know About Indexed Annuities

ATTORNEY NEWSLETTER

Reading Between The Lines On Complex Contracts

Return Calculations, Caps, Fees, And Penalties

Research Before You Buy

The Santa Clara financial elder abuse attorneys at Evans Law Firm, Inc. advise against deferred annuities for senior consumers because our litigators have seen too many older persons economically harmed by these complicated insurance contracts.  Deferred annuities are offered in various forms.  Insurance agents market indexed annuities in particular as supposed safeguards against market volatility and a way to “guarantee” retirement income.  Be cautious and do not take agent representations at face value.  Indexed annuities are sold as annuities that track the performance of a chosen market index.  In reality the contracts work far differently and will not perform as a direct investment in the chosen index would.  Indexed annuities are long insurance contracts with high fees, substantial penalties for withdrawals, and ways of calculating returns that disfavor you but work in the interests of the carrier.   If you or someone you know is over 60 and lives in Santa Clara County or elsewhere in California and has lost money on an indexed annuity, call us today at 415-441-8669 or toll free at 888-50EVANS (888-503-8267). 

Understanding The Complexity of Indexed Annuities

The U.S. Securities and Exchange Commission (SEC) provided some useful guidance on understanding the complexity on indexed annuity contracts.  The SEC’s Office of Investor Education and Advocacy recently updated the SEC’s Indexed Annuities Investor Bulletin,[1] which contains some important considerations for senior consumers considering indexed annuities.  Here are two excerpts from the SEC bulletin worth noting:

“… indexed annuities can expose investors to investment losses. If the indexed annuity is a security, generally a prospectus will be delivered to you. Before purchasing an indexed annuity, you should ask your financial professional what type of indexed annuity it is, what risks are involved, and about any expenses such as commissions and other fees you will have to pay. You should consider asking the question, “How much of the money I invest is going to work for me and how much is going to fees and expenses?”

“Before purchasing an indexed annuity, you should understand how this return is calculated and the extent to which price declines in the index can affect the performance of the indexed annuity.”

Tips For Evaluating An Indexed Annuity

  • Be mindful of surrender penalties, which can last anywhere from 5-15 years and be as high as 15% on money withdrawn.
  • Returns on indexed annuities are capped at a rate lower that may be lower than the true return on your chosen index, and are subject to a further limitation known as a “participation rate” that limits your return to 80-90% of an index return.
  • Administrative and subaccount fees are typically imposed under indexed contract and those annual fees will further erode your return.
  • Indexed annuities expose investors to investment risk. They are not insured like bank deposits and CDs even if it’s a bank that is offering the annuity.
  • 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.

Contact Us

If you are over 60 and live in Santa Clara County or elsewhere in California and have lost money on an indexed annuity or indexed universal life insurance contact Ingrid M. Evans and the other Evans Law Firm financial elder abuse, annuity and life insurance attorneys at (415) 441-8669, toll free at 888-50EVANS (888-503-8267), or by email at <a href=”mailto:info@evanslaw.com”>info@evanslaw.com</a>.

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

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 access the SEC’s Indexed Annuities investor bulletin here:  https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_indexedannuities.

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