Page 134 - Ready Set Retire

Stephen J. Kelley

However, people in the investment and insurance
communities just LOVE variable annuities.

1. Brokers love them because they carry high
commissions and often ongoing fees.

2. Wire houses (the Merrill Lynches or Ameriprises of the
world) love them because once you are in them you are
locked in by surrender charges and fees. Like in
401(k)s, big investment firms pay a fee to be included
in the mix. Once sold, they have a captive customer
subject to surrender terms and charges. They get to
charge you their normal – and often much higher than
in other assets – fees...you are captive, and subject to a
penalty for early termination.

3. Insurance companies love them because they get to
charge high fees, trap you into long-term contracts, and
they are not responsible for keeping your money safe
like they are in fixed annuities, since with a VA your
money is in the market, and you, not they, take all the
risk. Insurance companies love this.

Getting the picture?

Further, the fees charged on variable annuities can be high and
are often for unnecessary and unwanted features. Here’s an
example of the fees associated with a typical variable annuity
taken right off a Morningstar report.

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