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A Few Good Variable Annuities…Very Few
[/fusion_text][fusion_text]This is a public service announcement for people holding old variable annuities.
I hate variable annuities. I know hate is a strong word. I mean it. I hate variable annuities. Don’t ever buy one. Annuities are a product designed to be sold by slick salespeople looking to get a fat commission. The math is rigged against the buyer. The fees are often incredibly high (over 2% expenses are still normal). They create all sorts of tax problems by deferring taxes, but then subjecting you to a higher tax rate when you do withdraw from them.
Okay, but the title of this blog is about good variable annuities. I have come across three of them in a decade of analyzing them. What makes these ones good? The insurance/annuity companies messed up the math. For a ridiculously high fee, they guaranteed my clients 6% annual returns on their investments (7% in one case). Thankfully that high fee has become irrelevant because the 6% annual increase is done by separate accounting. I’ll spare you the math and let you know that a guaranteed 6% is a great deal today. You can’t buy this today. If you have it, you bought it a decade ago before the great recession.
The riders I’m talking about are often called guaranteed minimum death benefits and/or guaranteed minimum income benefits. If you have one of these on your annuities, you need to carefully analyze what you should do with that investment. Better yet, talk to me. Variable annuities are hopelessly complex. I have found that most annuities reps don’t even know the best way to use them. I stumbled upon a very good strategy to maximize the benefit of guaranteed minimum death benefit/income benefit riders designed by an investment advisor in California.
I can be your independent third party to help you determine if it will work for you. How am I independent? Don’t I get paid to manage people’s investments? Yes, but if you have a variable annuity with a very nice guaranteed minimum death benefit or income benefit, I can’t get paid on that. I charge asset based fees on investments I manage and I can’t hold those variable annuities. My clients who hold these annuities didn’t buy them from me and still hold them elsewhere. I really just enjoy finally winning against annuity companies for once. It’s about time one of their complex contracts backfired.
One last note – I have seen buyout offers from the annuity companies to get them to give up the variable annuities with high guaranteed returns. Don’t accept one of these offers without consulting an expert. The offers I have seen aren’t very good.[/fusion_text][separator style_type=”single” top_margin=”” bottom_margin=”” sep_color=”” icon=”” width=”” class=”” id=””][fusion_text]
Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. ASA gathers its data from sources it considers reliable. However, ASA makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.