Ameriprise Annuity Question - (yeah, I know...)

[Debinnov a]

Need advice regarding old Ameriprise annuity.

My wonderful (not really) CPA referred me to an Amerprise advisor. Due to my total ignorance, he sold me some type of annuity for around $200,000 back in 2003. It was the RiverSource Retirement Advisor Advantage Variable Annuity.. It is in an IRA. Mortality and expense (he called it) of .85% and who knows what else.

Back in 2009 (or when everything went down) I never got a call back from him over the course of the downslide and so when my balance went down to just under $100,000, I panicked and moved it all in their Money Market account with a guaranteed 3%. And (please don’t make me feel worse than I already do) I left it there until now. So I lost over 50%. But, the “death benefit” Is still at $194,000 so this is a plus. And I’m not paying anything more in for it and getting additional insurance now due to my health would be expensive but do I really need it with no kids at home and being retired? This account is paying out a “guaranteed” minimum of 3% yearly. (but probably netting a lot less than that with admin fees, etc.) All I know is that the balance has not grown over the past few years – even though it is supposed to pay 3%. I asked him about it and he is “checking” on the expenses/fees.

My question: I just sold my business and am retired. I am consolidating and just had a preliminary discussion with a Vangard advisor. I’m going to have more questions as I move over about $1 million in taxable and 401K monies (also have $500K in PenFed 3% CD's) but for now I’m addressing this annuity and I have three options:

• Sell/move/close the annuity (IRA) completely and just move the “current value” of $98,730 into an IRA at Vanguard. This will cause me to give up or lose the death benefit of $194,000. My advisor is checking to see if that stays the same (has for past many years) or if it is built to possibly go down after so many years.) There is a minimal surrender fee ($30) but I have to do it this month on anniversary.

• Keep it the same as it is… leaving it as fixed income so that I can pretty much preserve the principal and this keeps the life insurance/death benefit in place.

• Keep it but move some or all of the $98,730 into equities. I asked him about that today – no index funds – they are all mutual funds with high expenses/loads.

What would you do? This is only about 5% of my assets. I really want to move it from Amerprise but I'm thinking that giving up an additional $100K in death benefit might not make sense.



Debbie

 

[REWahoo]

I suspect that like most of us who have FIREd, you no longer have any need for life insurance. If it was me I'd extricate myself from the slimy clutches of Ameriprise and invest it in whatever asset class maintained my targeted allocation.

 

[Walt34]

It depends on your circumstances (you don't mention dependents/children/spouse, etc.) but if you don't have dependents and don't care about what is left behind then the life insurance benefit has no value to you since you'll be dead. If that's the case then what REWahoo suggests is probably the best course of action.

 

[Animorph]

I agree the death benefit might not be worth it. But how does the annuity income compare with the $98k value? Are you in a situation where the guarantees you are paying for might make the annuity value worth more than $98k? I wouldn't throw away something that paid an income as if from $200k but a lump- sum of only $98k.

 

[Texas Proud]

Sorry, but I am going to make you feel worse....

What was any so called adviser thinking when they had you invest in any kind of insurance policy INSIDE of an IRA

Say you die... they have just converted you life insurance policy (which is not taxed as income) into TAXABLE INCOME...

Heck, I would think about getting a lawyer and suing.... this is not even close to being any kind of proper investment...

 

[Debinnov a]

Texas Proud,

I agree. I didn't even realize what it was. I trusted him due to referral from CPA I used for my business.

Someone mentioned income? It is invested in mutual funds or MM etc. And follows the market on the funds. The cash value is now only $98k but death benefit is almost double and stays at same level. No income or anything else. If I can keep it and have it keep up with inflation and have $194,000 in life insurance ( I am married (I'm 57 DH is 50 and have 25 year old with learning disability and limited earnings potential) that would be nice for him.

Do you really think I might have recourse legally? What kind of lawyer would that be? I wouldn't know where to start. I also had someone mention that he knew I was conservative investor and how did I lose over 50% in 2009 and he never reached out to me at all to discuss. Not really an advisor if you ask me. Infuriates me that there were so many other options than an annuity that probably lined his pockets nicely.

Learned my lesson and excited to get onboard with Vanguard moving forward.

Debbie

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[Animorph]

Someone mentioned income? It is invested in mutual funds or MM etc. And follows the market on the funds. The cash value is now only $98k but death benefit is almost double and stays at same level. No income or anything else. If I can keep it and have it keep up with inflation and have $194,000 in life insurance ( I am married (I'm 57 DH is 50 and have 25 year old with learning disability and limited earnings potential) that would be nice for him.

I'll bow out, but something called "RiverSource Retirement Advisor Advantage Variable Annuity" that provides a lump sum or a death benefit but no actual annuity option seems a bit misnamed.

 

[Debinnov a]

Yes, name says it all "advantage to the advisor".... :::::sigh:::::;

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[Bestwifeever]

If I were you I would move forward, cut my losses, and take whatever cash value the annuity has now and invest it according to the asset allocation the Vanguard advisor and I came up with. Those funds will then have a chance of increasing in value in the future (I just wouldn't trust them to recover within the annuity, silly maybe, but that's me), and you will be finished dealing with the RiverSource person. I would just not waste any psychic energy considering a lawsuit--let it go and move on. The amount you are down is painful but you are in good shape otherwise so it shouldn't hurt your plans.

Congrats on selling your business.

 

[Texas Proud]

Like a few others, I would move the money to some other place such as Vanguard or Fidelity.... keeping the 'investment' just for the life insurance is not good... sure, you could die at a young age and it would be a good decision.... OR, you could live until your 90 and it would be a very stupid decision...


Since this is retirement money, I would invest it as such and if life insurance is what you need.... buy term.... you would probably be better off doing this than keeping what you have...

As far as finding a lawyer.... I would go online and do some research.... there is a lot of ways to find one now... starting at the state bar might be a good option...

 

[panacea]

These situations are so depressing to hear about. Don't know how advisors that like sleep at night (maybe with a really, comfortable, expensive pillow ). Pretty sure that 3% guarantee is before all the extra expenses so it's pretty much a break-even "investment." Agree that life insurance doesn't sound like a need for you anymore so I would get out of the product ASAP and roll it over to a Fidelity or Vanguard kind of provider as well.

 

[gcgang]

If the Death Benefit is guaranteed at the $194k, you basically have a guaranteed double for your heirs upon your death. Why not move the funds into the most aggressive fund available, knowing that if it blows up there is still the DB.

 

[Debinnov a]

Gcgang,

I'm considering that. Just got off the phone with the advisor. The death benefit will remain at $194k minimum and could go up if annuity investment total increases over $194k. The cash value will grow at 3% minimum (could go higher) and a .25 expense or I can move to mutual fund or morningstar navigator even. Anyone familiar with that? Of course the expense ratios will increase.

I am thinking I should move half or all into equities and think of it as a minimum $194k life policy for my son and if it grows in next ten plus years - all the better.

Debbie

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[aja8888]

Gcgang,


I am thinking I should move half or all into equities and think of it as a minimum $194k life policy for my son and if it grows in next ten plus years - all the better.

Debbie

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Life insurance proceeds inside of an inherited IRA will come out taxed so the proceeds will be significantly less.

 

[pb4uski]

.....Back in 2009 (or when everything went down) I never got a call back from him over the course of the downslide and so when my balance went down to just under $100,000, I panicked and moved it all in their Money Market account with a guaranteed 3%. And (please don’t make me feel worse than I already do) I left it there until now. So I lost over 50%. But, the “death benefit” Is still at $194,000 so this is a plus. And I’m not paying anything more in for it and getting additional insurance now due to my health would be expensive but do I really need it with no kids at home and being retired? This account is paying out a “guaranteed” minimum of 3% yearly. (but probably netting a lot less than that with admin fees, etc.) All I know is that the balance has not grown over the past few years – even though it is supposed to pay 3%. I asked him about it and he is “checking” on the expenses/fees......

What would you do? This is only about 5% of my assets. I really want to move it from Amerprise but I'm thinking that giving up an additional $100K in death benefit might not make sense. ...

While I agree that a VA inside an IRA is questionable, the unfortunate reality is that they are sold all the time. While I hate Ameriprise, WADR some of the problem is yours in that you panicked and moved it out of stocks... but you know that already and it is what it is.

At this point, the key thing is to find out what it is really earning. If it is really earning 3% minimum, then it might be worth keeping as part of your fixed income allocation for now. In 24 years you would be back to your $200,000.

If it is really paying 3% then the key question is this: If you had an opportunity to invest $98,730 in a relatively safe investment with no interest rate risk that paid a guaranteed 3% would you do it? Given how many of us were thrilled with the PenFed 3% CD back last December, for me the answer would be yes.

If it is not really earning 3% then I would take my lumps and move it to Vanguard.

 

[Texas Proud]

Gcgang,

I'm considering that. Just got off the phone with the advisor. The death benefit will remain at $194k minimum and could go up if annuity investment total increases over $194k. The cash value will grow at 3% minimum (could go higher) and a .25 expense or I can move to mutual fund or morningstar navigator even. Anyone familiar with that? Of course the expense ratios will increase.

I am thinking I should move half or all into equities and think of it as a minimum $194k life policy for my son and if it grows in next ten plus years - all the better.

Debbie

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Why would you want to stay with anybody who has cheated you so badly Even if he gave you sound advice today, it does not negate the really terrible advice he gave you before...


You can be aggressive with a different fund company with a lot less fees... do not get sucked in to staying.... it will cost you more than you will know...

 

[pb4uski]

....Just got off the phone with the advisor. The death benefit will remain at $194k minimum and could go up if annuity investment total increases over $194k. The cash value will grow at 3% minimum (could go higher) and a .25 expense ....

Or is it even less because of the .85% mortality and expense charge?

If it is really only 1.90% (3.00% - .25% expense - .85% M&E charges) then I would dump it - you can do just was well in a 5 year CD or wait for PenFed's December special.

You should be able to confirm/deny what you are really earning by looking at relationship of balances on successive policy anniversaries. Take the cash value as of the last policy anniversary divided by the cash value as of the previous policy anniversary and then subtract 1 and that shoudl get you your effective yield.

 

[clifp]

My guess from your comment that balance hasn't increase for few years is that the 3% minimum increase guarantee doesn't apply to the cash balance but rather just to the annuity balance.

The terminology varies on how to describe this but essentially is a mostly a fictional balance that applies only when you elect to decide to annuitize the premium. Each year you put off doing so they can afford to give you a least 3% increase in annual payments simply cause you have a shorter expected life span.

Anyway I'd double check exactly what the 3% covers and if it is what I suspect, then move the money.

It sounds like the death benefit is of minimal use to you, but it is worth seeing how much it would cost you to get a $100,000 term life to help you get a better idea of exactly what this policy is worth to you.

 

[pb4uski]

What would you receive if you annuitized the entire balance now?

 

[Independent]

My guess from your comment that balance hasn't increase for few years is that the 3% minimum increase guarantee doesn't apply to the cash balance but rather just to the annuity balance.

The terminology varies on how to describe this but essentially is a mostly a fictional balance that applies only when you elect to decide to annuitize the premium. Each year you put off doing so they can afford to give you a least 3% increase in annual payments simply cause you have a shorter expected life span.

.

This is a possibility.

If so, the original $200k is now $276k only if you take an annuity payout. That may be more attractive today than a lump sum.

 

[Debinnov a]

The balance has increased - that was my error. When I put it back to cash in 2009, it was $93k. It is now $98.7k. So close to 3%? If i keep it it will be because in cash it cannot go less than 3% but could go up AND I have the $194k death penalty and in retirement my tax rate should be max 15% as it will be taxed as part of estate. Does that sound right? Anyway Im still considering my options.

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[Debinnov a]

My advisor said nothing about any annuity payment or anything like that. The cash value is $98.7k and the death penalty total is 194k. He says it is not a life insurance product. It is an annuity that has a death penalty clause. I also add a clause that said that the death penalty of milk would never go below a certain amount but it can go up.

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[fosterscik]

Doesn't look as if you got 3% over the last 5 years. If you had, the balance would be $93k*1.03^5 = $107.8k. Obviously the exact value depends upon when it was converted in 2009 vs now (it may be a little less than 5 years).

Math shows your return (if actually 5 years) was only 1.2%. Not much better that a basic savings account.

 

[pb4uski]

It sounds like the account gets credited with 3% interest but then is also assessed an administrative expense charge (0.25%?) and mortality and expense charges (0.85%) and perhaps some other charges that at the end of the day net down to somewhere between 1-2%.

Deb, verify whatever your FA says by looking at your statement and see what increases and decreases are made to your account balance between periods and if they make sense. It could be that there are other charges that the FA is conveniently not telling you about and if you figure it out and ask then he'll say something like "I thought you knew about that charge".

 

[Debinnov a]

Yeah, he is not being up front... he actually said to me - looking at it and growth from 2009, it looks about 3% minus the .25 expense.... so not cool

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