ATTORNEY NEWSLETTER
Beware The Fine Print
In The Details: Caps, Spreads, Fees and Surrender Charges Devour Your Money
Our litigators often explain in our blogs why we think deferred annuities are not a good investment, particularly for seniors. Deferred annuities come in three forms: fixed rate, fixed-indexed rate, and variable rate. All three types of deferred annuities are complex, hold your money hostage to withdrawal penalties, and charge high commissions and fees, among other downsides. The San Francisco annuity and financial elder abuse attorneys at Evans Law Firm, Inc. represent[1] individuals who have lost retirement savings in deferred annuities, indexed universal and whole life insurance, and other unsuitable investments. Most of the victims we represent are seniors. If an agent or broker has sold you an inappropriate product such as life insurance or an annuity and you’re over 60 and live in San Francisco or elsewhere in California, call us today at (415441-8669 and we can help.
While fixed and variable annuities are still sold, agents especially push fixed-indexed annuities during volatile markets as investors are experiencing now; the pitch is that these contracts offer “guaranteed” protection (the fixed side) with upside participation in the market (the indexed side). Don’t buy it. Here are a few reasons to avoid the hype about fixed-indexed annuities:
- The “indexed” part of your premium will not be invested in stocks or an index. Instead, interest credited to your account is based on the performance of the particular stock index you choose. Your interest will not include the advantage of reinvested dividends which you can receive if you make a direct investment in an index fund. You are only credited (subject to caps, participation rates and spreads) with the price change of an index, but not the dividends you would have received if you owned the index in a brokerage account.
- Any interest will only be credited to your account annually (“annual point-to-point” crediting) so the daily value of your account does not grow during the year and is credited with interest only on the anniversary date. If you withdraw all your money before that date you will not see any interest, even if you withdraw on the 364th day of the annual period.
- Caps, participation rates and spreads will limit your gains. Caps limit how much money you may earn based on a particular index’s performance; if your cap is 4% and the index grows 10%, you will only be credited with 4% growth. Participation rates hold you to a percentage of any return on your chosen fund, never 100%; if a fund grows 4% and your participation rate is 80% you only get 3.2%. Spreads are a baseline over which interest may be credited. If the spread on your contract is 4%, for example, and the index returns 4%, you will be credited nothing.
- Access to your money is limited. Some carriers charge surrender penalties on withdrawals for 14 years or more! Market value adjustments levied by the carrier may also decrease your account’s cash value. Withdrawals will be subject to tax at ordinary rates. All deferred annuities are illiquid and this is a real danger particularly for seniors who may need their money.
- Bonuses are not free. Watch out if an agent promises you an upfront bonus. You will pay for that one way or another, including possibly by surrender charges on withdrawals.
Bottom Line
Our litigation practice has taught us that annuities and life insurance are complicated, expensive, dangerously illiquid, and disappoint consumers once the policies – and annual charges and real rates of return – kick in. Returns on tax-deferred IRAs and 401(k)s directly invested in stock and bond funds historically outpace returns on annuities and are much less complex. Also working for you is your Social Security benefit which is an inflation-adjusted annuity. In short, there are lots of other ways to benefit from tax deferred savings without paying big sales commissions and tying up your money in a deferred annuity. If you are considering an annuity, always consult your tax advisor and an investment professional with nothing to gain from a sale.
Contact Us
If you are over 60 and live in San Francisco or elsewhere in California and have been sold an inappropriate or unsuitable investment product or suffered loss on an annuity or life insurance surrender or replacement, contact Ingrid M. Evans and the other annuity and financial elder abuse attorneys at the Evans Law Firm for a free review of your policy at (415) 441-8669, or by email at <a href=”mailto:info@evanslaw.com”>info@evanslaw.com</a>. Our attorneys have experience with complex indexed universal and whole life policies and annuity contracts and cases against large insurance companies. We can help guide your case through a jury trial or toward an equitable settlement. We also handle cases involving physical and financial elder abuse, nursing home abuse, whole life insurance and universal life insurance, and indexed, variable, and fixed annuities.
Annuities and life insurance produce large sales commissions for brokers but are often inappropriate products for consumers, especially seniors. Leading providers and distributors of life insurance and 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. Rather, 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
Ameriprise Financial/RiverSource Life Insurance Company
Ameriprise Financial/Securities America, Inc.
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
Bankers Life Insurance and Casualty Company
Berkshire Hathaway Group
Berkshire Hathaway Life Insurance Company of Nebraska
Brighthouse Financial, Inc./MetLife
Citigroup Global Markets, Inc.
Crump Life Insurance Services, Inc.
CUNA Mutual Group/CMFG Life Insurance Company
Delaware Life Insurance Company
EquiTrust Life Insurance Company
Fidelity & Guaranty Life Insurance Company
Forethought Life Insurance Company/Global Atlantic Financial Group
Genworth Financial, Inc.
Genworth Life and Annuity Insurance Company
Genworth Life Insurance Company
Global Atlantic Financial Group/Forethought Life Insurance Company
Guardian Life Insurance Company
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
Merrill Lynch Life Agency Inc.
Metlife/Metropolitan Life Insurance Company/Brighthouse Financial, Inc.
Minnesota Life Insurance Company
National Life Group
National Life Insurance Company/Equity Services, Inc.
National Western Life Insurance Company
Nationwide Life Insurance Company
New York Life Insurance Company
North American Company for Life and Health Insurance
Northwestern Mutual Investment Services, LLC
Northwestern Mutual Life Insurance Company
Northwestern Mutual Wealth Management Company
Oxford Life Insurance Company
Pacific Life Insurance Company
Principal Financial Group
Prudential Life Insurance Company
Raymond James Insurance Group
Reliance Standard Life Insurance Company/Tokio Marine Group
RiverSource Life Insurance Company/Ameriprise Financial
Securities America, Inc./Ameriprise Financial
Security Benefit Group, Inc.
Security Benefit Life Insurance Company/Guggenheim Partners
Security Investors, LLC
The Standard Life Insurance Company
Symetra Financial Corporation
Symetra Life Insurance Company
Transamerica Life Insurance Company
The United States Life Insurance Company in the City of New York
Unum Life Insurance Company of America
USAA Life Insurance Company
The Variable Annuity Life Insurance Company
Voya/Reliastar Life Insurance Company
Wells Fargo Advisors
Western & Southern Financial Group
The Western & Southern Life Insurance Company
World Financial Group Insurance Agency, Inc.
[1] While we do not provide tax or investment advice at Evans Law Firm, we do represent consumers who have suffered losses from fraud, misrepresentations, inappropriate sales of unsuitable investments, and other misconduct.
