ATTORNEY NEWSLETTER
What Are Deferred Annuities?
Why Are Deferred Annuities Bad For Seniors?
Understand How Deferred Annuities Work
Deferred annuities are insurance contracts where the policyholder pays a premium to an insurance carrier now for income payments in the future. Below, we explain in more detail how these complicated insurance policies work. The bottom line is that Evans Law Firm, Inc. recommends against deferred annuities for seniors because consumers lose money due to sales commissions, withdrawal (or surrender) penalties, annual fees, and low returns on invested premiums. Sales and recommended surrenders and exchanges of deferred annuities to seniors may constitute financial elder abuse claims under Cal. Welf. & Inst. Code § 15610.30. Questionable sales tactics, like unannounced home visits or falsified applications, are illegal. See, e.g., Cal. Ins. Code § 790 et seq. (Unfair Insurance Practices Act). If you are over 60, and live in Sonoma County or elsewhere in California and would like us to review your annuity contract, call us today at 415-441-8669 (or toll free at 1-888-50EVANS) for a free review of your policy.
What Are Deferred Annuities?
In a deferred annuity contract you pay an upfront premium to an insurance carrier who in turn pays a sales commission to the agent who sold you the contract. The commission can be substantial (8-10% is common) and that money comes directly out of your premium. Your money then sits in the contract for a period known as the “surrender” or accumulation period; your money only grows (if at all) I accordance with the carrier’s complex formulas to calculate returns and is subject to caps and so-called participation rates which mean you will see less growth than the actual growth in whatever fund you have chosen. If you try and withdraw your money during this phase of the contract, you will pay a substantial penalty known as a surrender charge, discussed in greater detail below. Once the payout period begins (after the contract has “annuitized”) you will receive your income payments only on the basis the carrier established with you at the inception of the contract.
Why Are Deferred Annuities Bad For Seniors?
The greatest disadvantage of any deferred annuity is that withdrawals incur an insurance company penalty. Withdrawals during a policy’s “surrender period” are subject to penalties. The period can last ten years or more and the charges can be as high as 15% or greater. For senior consumers this penalty can be particularly harsh. A senior policyholder may need his or her money back for an emergency or escalating care costs or the like and a stiff penalty that eliminates any gain in the invested money and cuts into principal is a real hardship. Surrenders are also taxable events such any surrender can result in large tax bills in addition to the carrier’s penalty. Contributions to an annuity are tax-deferred, but any withdrawals you make will be taxed at your regular income tax rate, not the long-term capital gains tax rate.
Contact Us
If you are over 60 and live in Sonoma County or elsewhere in California and would like a free review of your policy contact Ingrid M. Evans at Evans Law Firm, Inc. 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.
