Many Variable Annuity Investors Remain Confused and Angry

[Liz]

This article claims that investing in variable annuities is essentially a bad idea:

"This is complicated stuff, but what remains easy to comprehend is that investing in variable annuities turns into bad news for plenty of brokerage clients."

Doesn't seem like an entirely well-rounded argument, but maybe someone with more expertise could weigh in.

Many Variable Annuity Investors Remain Confused And Angry - Forbes

 

[Norwayguy]

I hate this iPad. I had a long response with quotes copied but lost it. So here is the down and dirty. This article was written by a law firm litigating sales of annuities and has a clear bias and some info is misleading or just plain wrong. Having said that variable annuities have downs sides they tend to have higher costs than a straight investment in mutual funds.

First one example give is in regards to placing the annuity in an IRA as if that is a bad thing. If you ever read IRS publication 590 which deals with IRAs one would understand there are multiple types of IRAs one of those being an individual retirement annuity only offered through insurance companies and that this approach does not add cost to the annuity.

Second the article speaks of commissions of 7 to 10 percent and speak as if it is a cost paid for by the investor and it normally is not while mentioning surrender charges as well. Normally the agents commission is paid by the carrier and does not affect the annuity value.

 

[DHK]

That author of that article doesn't know the difference between **** and shinola.


I would NOT want him to represent anybody for securities law. His ignorance is astounding.


A better Forbes columnist would be Bill Singer. Forbes Search

 

[Norwayguy]

AnnuityNews - About

. The FINRA data shows that in 2013, variable annuity arbitration cases in numbered 174 -- down 21 percent from the 220 cases reported in 2012, 18 percent from 2011, 38 percent from 2010 and 40 percent from 2009.

That's 174 arbitration cases in all of 2013 involving variable annuities. And for anyone wondering FINRA recorded 308 arbitration cases involving mutual funds.

 

[sman]

This article claims that investing in variable annuities is essentially a bad idea: "This is complicated stuff, but what remains easy to comprehend is that investing in variable annuities turns into bad news for plenty of brokerage clients." Doesn't seem like an entirely well-rounded argument, but maybe someone with more expertise could weigh in. Many Variable Annuity Investors Remain Confused And Angry - Forbes

My personal belief is that if the sole purpose of the investment dollars is to grow them, then a VA isn't the best option. The main reason I use a VA is for risk management purposes. Most now offer income riders. These riders allow the investor to guarantee an income for life while still allowing them access to their funds if the need arises. It also allows for the potential of increased income.

As others have mentioned, the author of the article obviously have biased views.

 

[jmhalvo]

Yeah, he says an IRA cancels out the tax benefit and makes no sense. But of course if you buy the VA for other reasons like living benefits, then the IRA can be the BEST place to hold it (don't have to deal with lake of step up on basis). Would've thought he could get beyond the simple ideas ...

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Yeah, he says an IRA cancels out the tax benefit and makes no sense. But of course if you buy the VA for other reasons like living benefits, then the IRA can be the BEST place to hold it (don't have to deal with lake of step up on basis). Would've thought he could get beyond the simple ideas ...

lack of step up not lake of step up

 

[NettasNest]

Agreed that Zamansky doesn't know his topic well; almost sounds like he's trolling for clients. The annuity/IRA combo provide double tax deferral - nothing is canceled. Though they can be costly - VAs can be an excellent addition to retirement planning. They are NOT for everyone. The biggest reason for investors to be confused and angry most likely is that whoever sold the annuity didn't do a proper presentation; including costs transparency and full disclosure of the benefits and features.

 

[jmhalvo]

Agreed that Zamansky doesn't know his topic well; almost sounds like he's trolling for clients. The annuity/IRA combo provide double tax deferral - nothing is canceled. Though they can be costly - VAs can be an excellent addition to retirement planning. They are NOT for everyone. The biggest reason for investors to be confused and angry most likely is that whoever sold the annuity didn't do a proper presentation; including costs transparency and full disclosure of the benefits and features.

Absolutely true, which is why I sell them rarely.

 

[Norwayguy]

Agreed that Zamansky doesn't know his topic well; almost sounds like he's trolling for clients. The annuity/IRA combo provide double tax deferral - nothing is canceled. Though they can be costly - VAs can be an excellent addition to retirement planning. They are NOT for everyone. The biggest reason for investors to be confused and angry most likely is that whoever sold the annuity didn't do a proper presentation; including costs transparency and full disclosure of the benefits and features.

Actually they do not provide double deferral. Qualified annuities recieve thier tax deferall from the tax code ie 408a, 403b etc totally different to a nonqualified annuity.