A Variable Annuity is my least favorite annuity
Variable Annuities are my least favorite of the annuity types. They once served a purpose in the 1980s and 1990s when the stock market was thriving for a longer period than normal, and for high-end earners a good place for non-qualified tax deferred savings.
But now, in the current world market, I consider them the least effective annuity, especially for retirement income planning. A Variable Annuity is an insurance product with an investment feature. In other words, keeping the risk and increasing the fees- the very two points of retirement income planning that should be reduced to a minimum.
I always advise to double check with your variable annuity company and ask about each fee, not just the 1.00% to 1.50% charged by your broker.
- What is the contract maintenance fee?
- What is the mortality and expense fee?
- What is the annual fund operating expense fee?
- What are the subaccount fees?
- Is there a mutual fund fee?
- What are the transaction fees?
- What are the fees for the death benefit rider?
- What are the income rider fees?
It is easy to see how this financial product can add up in the game of “win or lose” your retirement dollars. Either way you pay.
You can look up almost any Variable Annuity and see their fees in %…and it is FREE.
In summary, Variable Annuity owners get hit with high fees, lower income and increased risk. I propose looking at retirement income strategies which may offer more income, a safer alternative, and can be designed with guarantees which provide income to customers regardless of market performance that could jeopardize the policyholder’s account values and the long-term contractual benefits you signed up for in the first place, which was a stable income from a desired guaranteed strategy.