USAllianz High Five Variable Annuity
I see a number of short comings as well.
First, the M&E fees are 1.40-1.60%. Then on top of that, add on the underlying mutual fund expenses (most of which include unnecessary 12b-1 fees). The cheapest total expense looks like around 2.00%. yikes!!
Second, b/c this is a variable annuity, tax treatment of gains is different for taxable accounts. If you invest any of the VA in equities, all of those gains will be taxed at ordinary income rates vs. lower capital gains tax rates. Not to mention the inability to take capital gains losses disappears once you put money into a VA.
Third, I believe that insurance contracts like these have minimum distribution ages, like 85 or so.
Fourth, surrender charges going out to 7 years (I think ?). What if you decide that you need the money before this? You may find out that not only will the principle guarantee not kick in, but you'll also be paying surrender charges.
Fifth, the guarantees are only as good as the quality of the insurer. Have you checked their ratings?
Sixth, can you actually calculate the GAV on your own? Looks pretty confusing.
So, while the downside is only as good as the insurer, the upside is only as good as:
Return - minimum of 2.00% - minus ordinary income taxes - inflation.
I think there is a good chance (especially if future equity and bond returns are low) that a negative real return will insue.
See what the NASD
have to say on VA's.