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Copyright 2016 by Independent Annuity Reviews. Phone: (888) 4402468

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2016 New And Updated Independent Consumer Report

The Truth About Variable Annuities

8 Cautionary Warnings That You MUST Be Aware Of Plus Discover The 10 "LittleKnown" Variable Annuity Fees That May Have A Devastating Impact On The Security Of Retirement

Over the years, variable annuities have been sold more than any other type of annuity. According to the life insurance and market research association LIMRA in their most recent 2015 report, variable annuity sales in the past have accounted for over 60% of total annuity sales. So it's no surprise to us that many of the people who visit do so because they are being steered toward the purchase of a variable annuity.

Despite being the number one most popular type of annuity sold, many financial experts consider some variable annuities to be problematic for a number of reasons which we will address in this article.

For now, here are just a few harsh sound bites about variable annuities:

"No variable annuities, especially in a retirement account."

Suze Orman, #1 on the Investment Hate List in her bestselling book , The Laws of Money, theLessons of Life.

"You rarely find me so deeply angry at a common investment product that I dream of blowing it to smithereens.

Jane Bryant Quinn, Newsweek article on Variable Annuities

"High fees, low flexibility, and horrendous tax treatment make Variable Annuities less attractive than ever, except to people who sell them."

Liz Pulliam Weston, MSN Money

"I cannot imagine a situation where I'd recommend a Variable Annuity."

John Biggs, former Chairman of TIAACREF

"Variable annuities are sold more aggressively than fake Gucci handbags on the streets of New York."

, 9/24/2004

Copyright 2016 by Independent Annuity Reviews. Phone: (888) 4402468

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The History of Variable Annuities

For such a popular investment, why do variable annuities receive so much criticism? Let's take a moment to better understand how variable annuities came into being and how they are built.

Variable annuities were an ideal investment in past decades.

In the late 1980s, the maximum that you could contribute to a 401(k) plan was $7,000, and after the stock market crash of 1987, the markets quickly rebounded toward record highs. What do these two incidents have to do with variable annuities?

First, this low limit on taxdeferred savings vehicles forced many people to place their aftertax income inside investments that were taxed at regular income tax rates.For the average investor, there was no way around the tax on capital gains, which meant that for most of the market boom, those gains were being taxed as ordinary income. Not only that, but if you wanted to move from one investment to another, you would also have to pay taxes on the gains you had received along the way.

What did that mean? Suppose your investment of $100,000 grew to $200,000. You would then have to pay $28,000$36,000 in taxes just to move your money into another investment.

Copyright 2016 by Independent Annuity Reviews. Phone: (888) 4402468

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Insurance companies saw this problem as an opportunity to introduce the variable annuity, with investment features they described as the perfect retirement vehicle. Variable annuities allow you to select from a variety of mutual fundlike investments called subaccounts. What makes investing in subaccounts different than traditional mutual funds is that you can move from one fund to another without having to pay taxes until you actually withdraw money from the funds.

Variable annuities became the preferred investment for highincome earners who had already maxed out their 401(k) or IRA contribution limits, and had plenty of savings to risk their money in the ups and downs of the stock market. A variable annuity (like all deferred annuities) allows money to grow tax deferred, so investors don't have to pay taxes on the gains until the money is withdrawn.

Variable annuities make sense when the market is gaining 1000%.

Having a variable annuity during the bull market allowed investors to keep their gains without having to pay taxes, thus allowing more of their money to be reinvested.

However, in order for the investor to have access to a high growth potential within their variable annuity, the insurance company would charge fees. This fee gave protection to the income side of things. In today's global economy, however, it's getting harder and harder to give investors who stay in the market income guarantees. The variable

Copyright 2016 by Independent Annuity Reviews. Phone: (888) 4402468

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annuity made more sense during the 80s and 90s, when the market wasn't as volatile, whereas today it's typically more expensive to own and not as effective at creating income as compared to other annuities.

We have identified the following 8 Variable Annuity Warningsthat you should be aware of before purchasing the variable annuity as part of your retirement portfolio.

Copyright 2016 by Independent Annuity Reviews. Phone: (888) 4402468

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