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Oct 2, 2022 by |

Sonoma County Financial Elder Abuse And Annuity Attorney: Educate Yourself On Deferred Annuities

ATTORNEY NEWSLETTER

Surrender Penalties On Withdrawals

Locked In To Contract Investment Strategy

High Fees And Lackluster Returns

Be skeptical when an insurance agent recommends a deferred annuity as a safe way to save for retirement in a volatile market like we’re in right now.  The Dow just had its lowest drop in two years so agents may use this kind of volatility when pitching deferred annuities.  In reality fixed indexed annuities and other deferred annuities are long-term, complex insurance policies which require you to lose control over your investment and some contracts may earn little to no interest. If you try to exit the annuity contract, you may be penalized by a surrender or withdrawal charge in the first 10 or more years of the policy.  Evans Law Firm, Inc. generally recommends against deferred annuities for older consumers because of these very characteristics; deferred annuities are expensive and complicated and tie up a senior’s money for years. Agent tactics for selling deferred annuities to older persons may be aggressive.  Unsuitable policies and deceptive or aggressive sales tactics may also violate legal protections for older consumers in particular. 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 Sonoma 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. 

Surrender Penalties, Loss Of Investment Control, Commissions, Fees And Caps

Three features of deferred annuities are main drawbacks of these contracts for seniors:

  1. Surrender Penalties. Carriers impose surrender (or withdrawal) charges on withdrawals prior to annuitization. Surrender periods may last seven to ten years and start at 7-10% (and sometimes more).  As an example, if your annuity charges a 7% penalty for withdrawals, and you need your money back from a $200,000 annuity, it’s going to cost you $14,000 ($200,000 x 7% = $14,000) to get your own money back.
  2. Loss of Investment Control. Deferred annuities are typically sold with a variety of investment “strategies” for you to choose among for your premium investment,  The “strategy” may be tied to a market index or some variety of “proprietary” index created for the sole purpose of selling the annuity policy and not a traded index at all.  Whatever the form, know that once you are committed to a “strategy” for your premiums you cannot change it.  Some “strategies” last three years which is a long commitment time in this market especially.  You have greater and immediate opportunities to change investments if you stay in a fund for your retirement savings.
  3. 3. Sales Commissions And Deferred annuities, such as fixed indexed annuities, pay high commissions — often 8% or higher of the total amount.  If you were sold a $200,000 annuity, the salesperson might take home $16,000 up front. Needless to say, there’s not a lot of incentive for him to put you in a low-cost index fund. Annual contract fees can also be high 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. Caps On Performance. Annuity providers determine a “cap rate,” an interest rate that limits the growth of an indexed annuity. This cap ensures that the annuity provider can meet their obligations and still make a profit on the product. But the cap works against the policyholder. Even if your chosen index grows at a significant clip your account will be credited in an amount no greater than the cap rate, which can be substantially less than the actual rate of growth in the index.

Contact Us

If you are over 60 and live in Sonoma 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=”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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