ATTORNEY NEWSLETTER
Understanding Fixed Indexed Annuities
Fees And Complicated Return Calculations
Lengthy Surrender Periods
Agents who sell deferred annuities like fixed indexed annuities to seniors receive a commission as high as 10% on the sale. Fixed indexed annuities are sold during times of volatile markets as offering security against falling equity markets. The real story with these contracts can be quite different. Evans Law Firm, Inc. recommends seniors avoid deferred annuities including fixed indexed annuities because these contracts are expensive and complicated and tie up a senior’s money for years. Sales of unsuitable annuities to seniors violate the law and may constitute financial elder abuse. Cal. Welf. & Inst. Code § 15610.30 (definition of financial elder abuse); Cal. Ins. §§ 790 et seq. (Unfair Insurance Practices Act) and 10509 (suitability requirement). Any senior victim may be entitled to damages and an award of attorneys’ fees and expenses for bringing a case. Cal. Welf. & Inst. Code § 15657.5. If you are over 60, live in Santa Cruz County or elsewhere in the Bay Area or throughout the State of California and own a deferred annuity (such as a fixed indexed annuity), call us today at 415-441-8669 (or toll free at 1-888-50EVANS) for a free review of your policy.
Fixed Index Annuity Problems
- Fixed indexed annuities are often sold with premium bonuses. Premium bonuses are really phantom benefits – you can never withdraw this “bonus” and if you surrender your contract the bonus is lost.
- Caps and participation rates reduce returns. Caps limit annual returns to a set percentage regardless of any greater growth in the selected index. Participation rates of 75-80%, for example, mean that your return will be less than the 100% you would receive if you had invested directly in an index fund.
- Fixed indexed annuities are routinely sold with an “income rider” for future income payments. Most lifetime income riders, however, pay a “level” income that never increases to keep up with inflation. Inflation is on the rise in the American economy and fixed income levels will not keep up with it.
- Most index strategies are new and complicated. As a result, fewer and fewer traditional indexes (S&P 500, Nasdaq, and Dow Jones) are used. The new strategies do not have any track record of historic performance allowing you the chance to evaluate true performance levels of the past.
- Fees can reduce the account value. Annual fees accumulate in these contracts and may be 1.5-3% when combined. There are also subaccount fees that are buried in the performance of the chosen index,
Lengthy Surrender Periods
Perhaps the greatest disadvantage of any deferred annuity, including fixes indexed annuities, 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.
Contact Us
If you are over 60 and live in Santa Cruz County or elsewhere in the State of California and have an indexed annuity, 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.
