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Aug 13, 2022 by |

Santa Cruz County Financial Elder Abuse And Annuity Attorney: Disadvantages Of Deferred Annuities For Seniors


Disadvantages Of Deferred Annuities For Older Consumers

Surrender Penalties And Fees

Six Major Downsides

Evans Law Firm, Inc. generally recommends against deferred annuities for older consumers because they are expensive and complicated and because these contracts tie up a senior’s money for years. Deferred annuities impose significant surrender penalties if you need your money before the annuitization phase kicks in.  Sales tactics can be aggressive and agents may try to rush a senior into a transaction or fail to provide all the information necessary to understand how a policy works.  The policy may be unsuitable and the sales tactics may constitute violations of insurance laws and elder protections. Cal. Weld. & Inst. Code § 15610.30 (definition of financial elder abuse); Cal. Ins. § 790 et seq. (Unfair Insurance Practices Act).  Senior victims may sue for damages and other relief including awards of attorneys’ fees and expenses for bringing your case.  Cal. Welf. & Inst. Code § 15657.5.  If you are over 60, live in Santa Cruz County or elsewhere in the Bay Area or throughout the State of California and own a deferred annuity, call us today at 415-441-8669 (or toll free at 1-888-50EVANS) for a free review of your policy. 

Why Are Annuities Poor Choices For Retirement Accounts?

  1. Surrender Penalties. A surrender charge is a fee assessed on investors assets if they move money out of a variable annuity. The surrender charges are often 5 to 7 percent of assets in year one and decline one percent a year until they go away over the next 5 to 7 years.
  2. No Additional Tax Benefit. A 401k, 403(b) or 457 retirement account is a vehicle for investors to invest tax-free (deferred) for retirement. Consequently, any tax benefit that annuities offer is completely worthless and provides no tax relief beyond what the plan does itself.
  3. 3. Charge High Fees. Deferred annuities are expensive. According to a recent Investment Company Institute (“ICI”) study, the simple average expense ratio (includes investment management and transaction fees) of equity mutual funds was 1.28 percent in 2016. Conversely, annuity fees can run in the range of 2.5 percent to 3 percent a year.
  4. Lackluster Performance. There are two issues that negatively impact the performance of a variable annuity. Some insurance companies promote their own mutual funds or investment accounts in variable annuities. The mutual funds that they use tend to be mutual funds that are underperforming or don’t have a lot of assets in them. So, they use these funds to create another income stream for the company. Good for the insurance company and bad for the investor since it often leads to lackluster investment performance. Additionally, with the total costs of variable annuities hovering in the 2.5 percent to 3 percent range per year, the added costs make it difficult to achieve a decent return on the investments.
  5. Death Benefit is Worthless. Although the insurance industry positions the death benefit as a way of protecting principal, this coverage is infrequently used and carries a high price tag. The only way investors can enjoy the insurance benefit is by dying with an account balance that is less than their original contribution minus any withdrawals.
  6. High Commissions.  Those who sell deferred annuities are handsomely rewarded for their efforts. Insurance companies pay commissions that range from 5 percent to 9 percent of invested assets.

Contact Us

If you are over 60 and live in Santa Cruz County or elsewhere in the Bay Area or State of California and have a deferred annuity or universal life insurance contract, we can review your contract for free.  You can reach Ingrid M. Evans at Evans Law Firm, Inc. at (415) 441-8669, or toll free at 1-888-50EVANS or by email at <a href=””></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


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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