ATTORNEY NEWSLETTER

The Downsides of Annuities

Annuities

Low interest rates are good if you’re young and need to borrow, but they’re not so good if you’re older, past your borrowing days, and looking for higher income in retirement. Some of us remember grandparents enjoying double-digit CD returns in the late ‘70s. Those days are gone, at least for now. Low interest rates are the new normal and prove fertile ground for annuity salesmen. Promises of higher returns are seductive, but unrealistic; hidden fees, charges and tricky policy rules, make it unlikely you’ll ever see the promised higher rates. Yet, many individuals fall for these promises, and it can sometimes get them into difficult situations. If you or someone you know has been the victim of loss from an unsuitable annuity, call Evans Law Firm, Inc. today at 415-441-8669. We represent victims of financial elder abuse and annuities and other investment fraud in the State of California.

Downsides

Annuities are contracts where you pay the carrier a premium today to pay you back in periodic payments in the future. Your money is meant to grow – free from tax – in the interim. To be sure, the tax deferral element is very important. But the arrangement has serious disadvantages too.

First, annuities are essentially illiquid until maturity. If you need your money earlier, you will be charged a surrender penalty and be taxed on the amount of your withdrawal. Second, surrender penalties may run as high as 15% and, even though the rate decreases over time, there’s still a surrender penalty for many years. There may also be a considerable tax on any withdrawal. Since the IRS taxes on a “last in first out” you will be taxed first on the growth at ordinary income rates; your withdrawal will not be treated as a return of premium (i.e., not taxed). If your annuity is an IRA any withdrawals prior to age 59 1/2 will also be subject to a 10% penalty.

The Big Picture

Bottom line is an early withdrawal may leave you with less than half of your own money returned! As if that’s not bad enough, recall that you paid a heavy commission to your agent out of your upfront premium so you were already in the hole before any growth, let alone a withdrawal. The promised high returns on your policy may disappear entirely by commissions, fees and surrender charges.

Always be sure to study the terms of any annuity offered to you and review the proposal and contract with a third-party professional and – always – with your tax preparer/advisor. We are not tax lawyers here at Evans Law Firm but we witness every day the hefty tax losses consumers often pay as a result of annuity transactions, particularly in surrenders and exchanges. We also see the effects of excessive surrender penalties every day on withdrawals from these products. If you have suffered these kind of losses, call us today at (415)441-8669 and we may be able to help.

Some of the major annuity and life insurance providers in California are:

• Transamerica Life Insurance Company
• John Hancock Life Insurance Company
• Bankers Life Insurance and Casualty company
• Massachusetts Mutual Life Insurance Company
• Pacific Life Insurance Company
• Genworth Life Insurance Company
• ING USA Annuity and Life Insurance Company
• Lincoln Benefit Life Company
• Metlife/Metropolitan Life Insurance Company
• Unum Life Insurance Company of America
• Voya/Reliastar Life Insurance Company
• Fidelity & Guaranty Life Insurance Company
• Lincoln Benefit Life Company
• AXA Equitable Life Insurance

Contact Us

If you or a loved one been the victim of financial loss in the form of surrender charges and market value adjustments or tax liabilities and penalties in any California county, contact the Evans Law Firm annuity fraud attorneys at (415) 441-8669, or by email at info@evanslaw.com. Our attorneys have experience with complex financial contracts and large insurance companies. We can help guide your case through a jury trial or toward an equitable settlement. We handle cases involving physical and financial elder abuse, qui tam and whistleblower law, nursing home abuse, whole life insurance and universal life insurance, and indexed, variable, and fixed annuities.