Comments on: Pros And Cons Of Variable Annuities

By: Ralph Santillo

Ralph Santillo — Thu, 15 Oct 2009 20:44:33 +0000

Is a va appropiate for a 65 year old who could wait about seven years before starting a withdrawal program.

By: Bob

Bob — Mon, 21 Sep 2009 21:29:15 +0000

GK, this is a great product. I have it myself. You did a nice job representing it here. The other way to combat some of the cons is to consider converting part of your IRA into the annuity (rather than post-tax income), given that you can’t touch till 59 and 1/2 anyway, you’ll avoid any sort of surrender charges. I agree that the actual balance is less important, its the guaranteed withdrawal balance that matters. If you want to leave an inheritance, buy a little insurance. Also, after 10 years its a guaranteed 200%, after 20, 400% and after 25 years a 600% return that your annuitized income stream is predicated on if you don’t touch it.

By: TP

TP — Fri, 04 Sep 2009 02:18:16 +0000

This is one of the most balanced reviews of variable annuities that I’ve come across. Good to find straight information with no spin in either direction. I do want to point out one little thing.

“Value dependent on the claims-paying ability of the insurance company in question. If your insurer goes out of business, so does your money.”

The above is listed as one of the cons of variable annuities. It’s only partially true, much as it is for deposits in a bank account. State guaranty funds cover a portion of annuity and life insurance holdings in the event of a company default. It seems to me to be similar to FDIC or SIPC protection.

It’s also my understanding that many people have know idea that state guaranty funds exist, because insurance agents and other financial advisors cannot mention it during the sales process unless asked about it.

Some more info can be found at:
http://www.nolhga.com/policyholderinfo/main.cfm

By: GK

GK — Thu, 02 Jul 2009 05:00:18 +0000

What you fail to mention is that on the guaranteed income side of the Variable Annuity there are no expenses whatsoever all returns are net as are withdrawals. Prudential has a rider that locks in the highest day of your portfolio while in the accumulation stage in addition 7% net is credited to the income side in down years guaranteeing that you double your money in 10 yrs or less. Clients who buy this product are building a guaranteed investment that down the road will provide a lifetime of income. The costs come from the actual investment and only affect the death benefit or a surrender. Assuming someone were to go into the Prudential with the HD7 rider and the market had a negative return for 10 yrs straight the client would be guaranteed that the investment doubled. $100,000 invested in 10 yrs is worth $200,00 at this point client can begin an income stream of 5% a yr on the guaranteed highest achieved value. Personally I don’t see an investment that can even compete. With my program I don’t care the expenses come from the actual balance because I am only interested in providing a lifetime of income to myself and my spouse, whatever is left the kids can fight over. In the same scenerio $100,000 invested in a growth mutual fund that loses for 10 yrs would be worthless and no way to get a lifetime of income based on a minumum of $200,000.

By: Jase

Jase — Mon, 06 Oct 2008 23:30:36 +0000

I would have to think the living benefits offered on some of the more recent VA’s are a bit more attractive to investors now after the 30% drop of the DJIA. Not a cure-all for sure but for lifetime predictable income they do have a place for some portfolios. Prudential offers one with a 7% annual with daily market lock until the first withdrawal ( then that goes to quarterly market lock) so someone who may be able to go 7-10 yrs before taking an RMD or other distribution may be suited for it. Just my opinion.

By: Robert MacDonald

Robert MacDonald — Thu, 31 Jul 2008 23:36:06 +0000

Very well balanced and reasonable comments on the pros and cons of variable annuities. I have been in the insurance industry for over 40 years and while a great fan of annuities, every time I would study the ins and outs of variable annuities the conclusion reached was that the benefits never matched the fees and limitations of the contract.