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Variable Annuity
Old 06-26-2012, 04:20 PM   #1
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Variable Annuity

Hi,
I have a variable annuity that I purchased in 2000 that started out with American Skandia, but was sold to Prudential several years ago.
How I wish I had not purchased this, but I was conned by a "financial advisor" that I trusted at the time.
Long story short, I invested 28K and, no matter how I move, I cannot get the value past a little over $15K.
Should I roll over what I have left into my new retirement account at work? I just opened a Guided Portfolio program with Valic that I will fund through payroll deduction. Or do you have other suggestions on how I can begin to recoup some of the loss.
The reason I bought this annuity is because I was wrongly told by the "advisor" that it was "guaranteed to double in 10 years".
I've learned a lot since then, but I'm on the fence as to roll it and take a large loss or keep it as my insurance policy since my beneficiary will at least get the 28K. However, I do not have children and have more than enough to leave my husband and charity. Thanks so much for your thoughts!
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Old 06-26-2012, 05:21 PM   #2
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Valic is well-known for being a poor choice for investments. Did you have other options?

Some folks do something called 1035-exchange into a Vanguard variable annuity which has some of the lowest expenses for a variable annuity in the industry.
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Old 06-27-2012, 09:14 AM   #3
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Quote:
Originally Posted by DebER View Post
Hi,
I have a variable annuity that I purchased in 2000 that started out with American Skandia, but was sold to Prudential several years ago.
How I wish I had not purchased this, but I was conned by a "financial advisor" that I trusted at the time.
Long story short, I invested 28K and, no matter how I move, I cannot get the value past a little over $15K.
Should I roll over what I have left into my new retirement account at work? I just opened a Guided Portfolio program with Valic that I will fund through payroll deduction. Or do you have other suggestions on how I can begin to recoup some of the loss.
The reason I bought this annuity is because I was wrongly told by the "advisor" that it was "guaranteed to double in 10 years".
I've learned a lot since then, but I'm on the fence as to roll it and take a large loss or keep it as my insurance policy since my beneficiary will at least get the 28K. However, I do not have children and have more than enough to leave my husband and charity. Thanks so much for your thoughts!
One thought I have is that it is usually better to think of your entire financial position, rather than trying to recoup a particular loss.

As to exactly what might be best for you with this one investment, I have no idea. But good luck in whatever you decide.

Ha
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Old 06-27-2012, 12:30 PM   #4
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Isn't the one great thing about a VA is that they can't lose money? What kind of VA loses half its value? Is that just early termination costs? I'd try to understand all the relevant fine print before bailing on it. Sometimes the costs of doing that are higher than just waiting it out.
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Old 06-27-2012, 01:34 PM   #5
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Isn't the one great thing about a VA is that they can't lose money?
As evidenced by the OP's situation, this is a complete falsehood propagated by annuity sales 'professionals'. Variable annuities are invested in the market and those investments can and do lose money.

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What kind of VA loses half its value?
A typical VA charges fees in the range of 3% to 4% annually. Your underlying investments have to overcome those headwinds each and every year to grow in value. Losing value is easy.

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Is that just early termination costs?
No - see above.

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Originally Posted by Animorph View Post
I'd try to understand all the relevant fine print before bailing on it.
The time to learn all the relevant fine print is before, not after, forking over your money to the insurance company.

This thread is timely in that some friends just asked me to review a variable annuity they were thinking about purchasing. I'd never given more than a cursory glance to these products, enough to have a "no thanks, way too costly" reaction. After spending some time with all the fine print contained in the 120 page prospectus I was absolutely appalled at the complexity and costs layered throughout the "guarantees". As is frequently said, the only guarantees are that the salesman and insurance company will make money.

My friends are intelligent people and had thankfully developed some serious doubts about the VA before I met with them. After our discussion they developed serious doubts about the motivation of the individual who offered to sell them this great product.

They are now investigating Vanguard and 'pssst' Wellesley...
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Old 06-27-2012, 02:34 PM   #6
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http://www.smartmoney.com/retirement...nnuities-9512/

This is a very good article on VA's
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Old 06-27-2012, 03:31 PM   #7
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Hi if you went with a vanguard VA after say 20 years the taxes would be your ordinary income. When you start to take out .Is this correct.
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Old 06-27-2012, 03:34 PM   #8
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Hi if you went with a vanguard VA after say 20 years the taxes would be your ordinary income. When you start to take out .Is this correct.
I inherited a fixed annuity from my father. It was taxed as ordinary income.
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Old 06-27-2012, 03:36 PM   #9
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...
Long story short, I invested 28K and, no matter how I move, I cannot get the value past a little over $15K....
I don't understand this--were you able to (and did) change what the annuity was invested in?
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Old 06-27-2012, 03:36 PM   #10
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As evidenced by the OP's situation, this is a complete falsehood propagated by annuity sales 'professionals'. Variable annuities are invested in the market and those investments can and do lose money.

A typical VA charges fees in the range of 3% to 4% annually. Your underlying investments have to overcome those headwinds each and every year to grow in value. Losing value is easy.

No - see above.

The time to learn all the relevant fine print is before, not after, forking over your money to the insurance company.

This thread is timely in that some friends just asked me to review a variable annuity they were thinking about purchasing. I'd never given more than a cursory glance to these products, enough to have a "no thanks, way too costly" reaction. After spending some time with all the fine print contained in the 120 page prospectus I was absolutely appalled at the complexity and costs layered throughout the "guarantees". As is frequently said, the only guarantees are that the salesman and insurance company will make money.

My friends are intelligent people and had thankfully developed some serious doubts about the VA before I met with them. After our discussion they developed serious doubts about the motivation of the individual who offered to sell them this great product.

They are now investigating Vanguard and 'pssst' Wellesley...
I have an investment in Wellesley and if I surrender will most likely open an IRA with Vanguard.
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Old 06-27-2012, 03:38 PM   #11
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Originally Posted by DebER

I inherited a fixed annuity from my father. It was taxed as ordinary income.
So if I was 65 and was in a 15% tax bracket that is all I would have to pay
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Old 06-27-2012, 03:39 PM   #12
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I don't understand this--were you able to (and did) change what the annuity was invested in?
Yes I have a few times. Once I even had a "financial advisor" pick the funds for me. That's one of the reasons I don't understand why I cannot gain on this thing.
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Old 06-27-2012, 03:42 PM   #13
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If you have access to TIAA-CREF I'd go with them for a variable annuity. Where I work they offer Valic, Lincoln and TIAA. The TIAA fees are around 0.5%
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Old 06-27-2012, 03:42 PM   #14
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So if I was 65 and was in a 15% tax bracket that is all I would have to pay
That would be my understanding, but of course I'm no expert. Since I took a lump sum distribution on my father's annuity it put me in a higher tax bracket.
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Old 06-27-2012, 03:44 PM   #15
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If you have access to TIAA-CREF I'd go with them for a variable annuity. Where I work they offer Valic, Lincoln and TIAA. The TIAA fees are around 0.5%
I, just this week, opened up an account with Valic that I will begin contributing to. So, I may consider that.
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Old 06-27-2012, 03:46 PM   #16
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Yes I have a few times. Once I even had a "financial advisor" pick the funds for me. That's one of the reasons I don't understand why I cannot gain on this thing.
I don't know nothing 'bout annuities, but I wonder if that's a big reason why you cannot gain--more fees every time you make a change, I bet.
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Old 06-27-2012, 03:59 PM   #17
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The TIAA fees are around 0.5%
Have you read their VA prospectus in detail to confirm this number?

Edit: I'll save you the need to respond. Here's a screen shot of their fees/costs associated with their "Intelligent Variable Annuity". Looks more like 3.5% than 0.50% to me...
Attached Images
File Type: jpg Intelligent Variable Annuity.JPG (131.3 KB, 22 views)
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Old 06-27-2012, 04:21 PM   #18
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Have you read their VA prospectus in detail to confirm this number?

Edit: I'll save you the need to respond. Here's a screen shot of their fees/costs associated with their "Intelligent Variable Annuity". Looks more like 3.5% than 0.50% to me...
My VA is a 401a group annuity as part of a state retirement plan, so the fees are considerably less that the "Intelligent Variable Annuity"
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Old 06-27-2012, 04:26 PM   #19
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Ah yes, the "intelligent variable annuity". Oxymoron?
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Old 06-27-2012, 04:27 PM   #20
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My VA is a 401a group annuity as part of a state retirement plan, so the fees are considerably less that the "Intelligent Variable Annuity"
That's good, but I doubt the OP would be eligible to purchase that product, correct?
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