Page 12 - Know-So Money, Hope-So Money, Retirement Secrets Wall Street Doesn't Want You to Know

Dubious Advantages

But what about those guarantees and other advantages variable

annuities are always hyping?

The benefits to the investor are marginal if they exist at all. I recently
had a woman come in to discuss her mom’s variable annuity. Her

broker had told her that the value of the account (which originally had

$100,000 deposited into it) was really $125,000, even though her
statement said it was worth only $70,000. She thought the $125,000

was correct because she had been told there was a 5% minimum
guarantee on the annuity.

So, we called the company. This is something I often do when meeting

with clients because it is so enlightening to them. Also, I know what
questions to ask! What we found out was that if her mom died, she

would receive $125,000. But if her mom wanted to take her money out
today, she would only get $70,000!

What was she paying for that benefit? $1,000 per year. For what was

essentially a life insurance policy (maybe) worth $55,000. And she was

sold this annuity as a safe investment, even though her total $100,000
was at risk in the market, unless she died! Bottom line, she was sold an

unnecessarily risky investment and then charged an expensive fee to
mitigate a portion of that risk available to her only after she died.

In another case I had a prospective client tell me he had a variable

annuity that had a minimum annual growth of 6%. This is a very

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