Quote:
Originally Posted by Tom Hannon
My financial advisor is also pushing VA on us. After asking my accountant and a few other high end investment friends of mine, they all say to stay away and stay with the fixed account. From what I learned, agents/advisors selling these annuities make a big commission.
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I spent twenty-five years in sales and marketing management for New York Life and Principal Financial Group, so know a little bit about annuities. The commission on annuities is generally about 3-3.5 percent for the major companies, though the commission rate is generally reduced on large amounts. Some smaller companies I have heard of pay 7-10 percent commission, which is usually reflected in more onerous withdrawal penalties. There are several reasons to invest in annuites, with the most common being tax deferral on accumulated earnings. If one is looking to accumulate rather than take withdrawals this is an advantage as you get to keep all the money invested and earn interest or growth on the entire amount without paying taxes as the investment grows. There are many features that are built into annuities that may be attractive to a given individual such as guaranteed death benefit (your original investment will be paid to a named beneficiary upon your death even if the value has dropped below the original amount and that guaranteed death benefit may be adjusted upward every few years to reflect the higher value - there is a small mortality cost deducted for this feature). Another advantage is that you can move your money into different investment accounts without incurring a taxible event. There are variable annuities that will pay a guaranteed income of 5% per year to the annuitant guaranteed for life, and will bump the income up every 5years if the accumulated value has grown since the previous lock-in period. Annuities can be good, but are not for everyone. If the features of an annuity arent of interest to you, you are better off in mutual funds generally, as the internal costs will be somewhat less.