No Load Annuities - Build Your Own Benefits
Annuities have received a lot of bad press the past few years. High expenses and high sales charges in the form of contingent deferred sales charges (penalties) along with questions of suitablity for older investors has lead to increased scrutiny by both regulators and the press. Yet sales of deferred annuities continues to grow.
Why? Investors must like some of the features that annuities offer. One of the features often describes the ability to invest your money aggressively in the mutual funds offered in the annuity, while knowing your heirs will receive no less than the amount you originally invested less withdrawals when you die. Some offer a step up in the death benefit to the highest value on the annuity contract's anniversary date. Investors seem to like these guarantees, and are willing to pay extra for them.
However with the advent of no-load annuities you may be able to duplicate many of these benefits at a much lower cost than agent sold policies offer.
Take the basic benefit that pays your heirs the higher of the current contract value or the amount of your initial investment. While most annuity contracts charge 1.25% per year in Mortality expenses the Schwab Signature annuity offers this benefit for only .85% per year in Mortality charges, and Ameritas offers this benefit with only a .55% mortality charge.
To get a death benefit that steps up to the highest anniversary value many companies charge an extra .30% annually. But you can approximate this guarantee yourself at no cost by using two no load annuity companies and the 1035 exchange rules. The way this would work is you choose a no load annuity with for example Schwab. If your annuity appreciates in value and you decide to lock in a new higher death benefit for your heirs you simply complete an exchange to say Ameritas. Neither company charges you a penalty or fee for withdrawal so you have effectively stepped up your death benefit without paying anything extra.
By combining immediate annuities with deferred annuities you can also duplicate many of the living income benefits and principle return benefits offered by variable annuity companies. Again with lower cost to you.
If you have variable annuity contracts that you would like analyzed seek guidance from a fee only advisor that will have no conflicts of interest in helping you make the decision that is best for you.
Why? Investors must like some of the features that annuities offer. One of the features often describes the ability to invest your money aggressively in the mutual funds offered in the annuity, while knowing your heirs will receive no less than the amount you originally invested less withdrawals when you die. Some offer a step up in the death benefit to the highest value on the annuity contract's anniversary date. Investors seem to like these guarantees, and are willing to pay extra for them.
However with the advent of no-load annuities you may be able to duplicate many of these benefits at a much lower cost than agent sold policies offer.
Take the basic benefit that pays your heirs the higher of the current contract value or the amount of your initial investment. While most annuity contracts charge 1.25% per year in Mortality expenses the Schwab Signature annuity offers this benefit for only .85% per year in Mortality charges, and Ameritas offers this benefit with only a .55% mortality charge.
To get a death benefit that steps up to the highest anniversary value many companies charge an extra .30% annually. But you can approximate this guarantee yourself at no cost by using two no load annuity companies and the 1035 exchange rules. The way this would work is you choose a no load annuity with for example Schwab. If your annuity appreciates in value and you decide to lock in a new higher death benefit for your heirs you simply complete an exchange to say Ameritas. Neither company charges you a penalty or fee for withdrawal so you have effectively stepped up your death benefit without paying anything extra.
By combining immediate annuities with deferred annuities you can also duplicate many of the living income benefits and principle return benefits offered by variable annuity companies. Again with lower cost to you.
If you have variable annuity contracts that you would like analyzed seek guidance from a fee only advisor that will have no conflicts of interest in helping you make the decision that is best for you.
technorati tags:Finance, No-Load Annuity, financial planning
Labels: annuities, financial planning
posted by Joe Taylor at 11:18 AM
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