Quote:
Originally Posted by Bobcuse
I am now in my early 70's and do not want to risk my money anymore in the market. I am looking for an experienced financial consultant/advisor who would review a proposal I have for a combination of fixed annuities (including some with hybrid features) which looks like what I would want to provide security and income without huge fees and severely restricting surrender charges. Obviously I would pay a consultation fee but I need an expert opinion other than the financial advisor who is recommending this plan to help me thoroughly understand the pros and cons of this package. If anyone knows a good person who could do this I would appreciate some names. Thank you.
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I just helped a friend analyze his variable annuity with AXA. I was shocked to find out how expensive it is:
Here are the details.
- 7 year surrender charge with a max surrender of 10% first year and declines.
- Typically the longer the surrender charge and higher the % surrender, the more you pay in commissions. Vanguard, USAA and TD Ameritrade have no commission products with no surrender charges. These products can still have expensive fees.
- Outside of the high commissions, the main problem is high fees.
- I strongly suggest that you have your salesperson fully explain all of your yearly fees for an insurance product. Get it in writing in a formal letter and have them sign it! These insurance products are typically very complex and this complexity favors the Insurance company, not you as an investor.
- MENA expense (mortality and administrative) = 1.3% per year
- 6% guaranteed income benefit (GMIB) = .8% per year
- Death benefit (GMDB) = .8% per year
- Underlying investment operating expenses = 1% per year
- Advisor charging a "management fee" = 1.2% per year
Total yearly expenses = 5.1% per year.
It is really hard for your investment to grow if you are paying 5.1% per year in fees! It's still hard to grow your investment if you are paying 2%+ in total fees.
Personally, I think you are better off using low cost mutual funds like Vanguard or Dimensional Funds and having a very conservative allocation so you can sleep at night.
Good luck.