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Feb 16, 2022 by |

Sonoma County Financial Elder Abuse And Annuity Attorney: Deferred Annuities And Seniors

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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.

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"I contacted Attorney Ingrid Evans for advice about a financial elder abuse case. She was extremely knowledgeable, bright and informative. I highly recommend her. I am an attorney myself, and know when I am talking to a another excellent attorney."
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