AXA Equitable Accumulator Plus IRA vs Vanguard Index Fund

Have a question about your personal investments? No matter how simple or complex, you can ask it here.

AXA Equitable Accumulator Plus IRA vs Vanguard Index Fund

Postby eminded26 » Wed Oct 21, 2009 5:36 pm

Parents are looking into moving their Traditional IRA away from what AXA Equitable Calls their Accumulator Plus IRA.

From what I could gather, the funds it's investing in and expenses are such:

EQ/Common Stock Index
EQ/International Core PLUS 0.83%
EQ/BlackRock International Value - 1.43% (5.25% front-load)
EQ/T. Rowe Price Growth Stock - 0.73%
EQ/GAMCO Small Company Value - 1.12%

They're looking at a simple Index fund, like a Vanguard Target Retirement 2015, instead. Expense ratio - 0.18%.

This AE product was sold to them by a broker at Wachovia.

Anybody have any good or bad feelings about either product?
eminded26
 
Posts: 33
Joined: Fri Aug 07, 2009 2:05 pm

accumulator plus

Postby pkcrafter » Wed Oct 21, 2009 6:35 pm

It looks like the AXA Equitable Accumulator Plus is an annuity. If true, I doubt you can transfer it to an IRA without penalty, but you may be able to transfer it to a Vanguard annuity.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
pkcrafter
 
Posts: 8353
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA

Postby eminded26 » Wed Oct 21, 2009 6:37 pm

That was my initial thought, but on the statement it says:

Contract Type: Accumulator Plus
(Rollover IRA)
eminded26
 
Posts: 33
Joined: Fri Aug 07, 2009 2:05 pm

Postby tarnation » Wed Oct 21, 2009 9:59 pm

I think what has happened here is inside the IRA account, the annuity was purchased. So there may be surrender fees with the annuity, but you should be able to transfer the IRA to another custodian.

IMO, this despicable behavior on behalf of the broker; it is equivalent to theft by deception. You should run as fast as you can away from them (well check your surrender fees first, then run).
Image
User avatar
tarnation
 
Posts: 2158
Joined: Thu Apr 26, 2007 12:36 am

Postby eminded26 » Thu Oct 22, 2009 12:44 am

Why would it be so bad if that's what they did?
Bought an annuity within an IRA?

What questions should we be asking the broker?
eminded26
 
Posts: 33
Joined: Fri Aug 07, 2009 2:05 pm

Postby MossySF » Thu Oct 22, 2009 2:46 am

eminded26 wrote:Why would it be so bad if that's what they did?
Bought an annuity within an IRA?

What questions should we be asking the broker?


An annuity provides tax deferral growth by using an insurance wrapper. The cost of the wrapper can be relatively low (0.35%) from Vanguard but often pretty high (1%-3%) from the typical life insurance company.

A Roth IRA already provides tax deferral growth. Hence, putting an annuity inside either an IRA or Roth IRA is totally wasted effort. The only purpose of such a move is to line the pockets of the salesperson selling the annuity.
User avatar
MossySF
 
Posts: 1797
Joined: Thu Apr 19, 2007 9:51 pm

Postby eminded26 » Thu Oct 22, 2009 11:17 am

Thanks all.

I spoke with my parents and they're going to poke some questions at the broker.

It was a matter of trusting the broker and going with his recommendations.

We're talking hundreds of thousands of dollars in there...

At the very least, I'd like to see it moved into a low-cost mutual fund at Vanguard.
eminded26
 
Posts: 33
Joined: Fri Aug 07, 2009 2:05 pm

Postby tarnation » Thu Oct 22, 2009 11:39 am

eminded26 wrote:Thanks all.

I spoke with my parents and they're going to poke some questions at the broker.

It was a matter of trusting the broker and going with his recommendations.

We're talking hundreds of thousands of dollars in there...

At the very least, I'd like to see it moved into a low-cost mutual fund at Vanguard.

It is sad that your parents are unwitting victims, but that is how con men make their money. Instead of "poking" questions at him, try "stabbing" them at him. Tell him you don't think that investment even satisfies the suitability requirement that broker/dealers are required to meet. Further, I would insist that he find a way to release them from the contract without further surrender fees, or you will be taking the matter up with your state Securities Authority and anyone else interested in a good "evil broker gets over on poor old folks story" these days.
Image
User avatar
tarnation
 
Posts: 2158
Joined: Thu Apr 26, 2007 12:36 am

Postby eminded26 » Thu Oct 22, 2009 2:04 pm

He had a preliminary conversation with the guy and according to him --

the AXA has a 1.5-2% cost.
The underlying funds have internal costs to them.
He will be getting those. He thinks .5 or so.

They got $31K when they signed up. There would be a diminishing cost (penalty) to surrender early. They're in the 4-5 year mark of an 8 year commitment.

So that's the deal as it stands. They're going to meet to go over the actual specific numbers.

Any thoughts on that stuff? I wasn't aware of the $31k.
eminded26
 
Posts: 33
Joined: Fri Aug 07, 2009 2:05 pm

Postby mickeyd » Thu Oct 22, 2009 2:28 pm

They got $31K when they signed up. There would be a diminishing cost (penalty) to surrender early. They're in the 4-5 year mark of an 8 year commitment.



Not sure what the first sentence means. Could you explain it another way?

As for the rest of the quote above, the variable annuity that is being sold to your folks will make a bunch of commission (money) for the agent/broker/rep/salesman and will put the client behind the eight ball, especially if they happen to need to make a withdrawal before the end of the surrender period.

Run Away, Run Away....
Last edited by mickeyd on Thu Oct 22, 2009 2:29 pm, edited 1 time in total.
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle
User avatar
mickeyd
 
Posts: 3634
Joined: Fri Feb 23, 2007 3:19 pm
Location: Deep in the Heart of South Texas

Postby eminded26 » Thu Oct 22, 2009 2:29 pm

They gave them $31k to sign an 8-year commitment.
eminded26
 
Posts: 33
Joined: Fri Aug 07, 2009 2:05 pm

Postby mickeyd » Thu Oct 22, 2009 2:33 pm

eminded26 wrote:They gave them $31k to sign an 8-year commitment.


AXA has given your parents $31,000 cash? Is that what you are saying? Or, has AXA promised to give them some kind of credit to be applied to their "account" that has many, many provisions and hidden hoops that they must comply with in future years in order to receive the $31,000? There is a big difference.
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle
User avatar
mickeyd
 
Posts: 3634
Joined: Fri Feb 23, 2007 3:19 pm
Location: Deep in the Heart of South Texas

Postby eminded26 » Thu Oct 22, 2009 3:05 pm

He said they just added the whole $31k to the account when they opened it.
eminded26
 
Posts: 33
Joined: Fri Aug 07, 2009 2:05 pm

Postby tarnation » Thu Oct 22, 2009 3:12 pm

There are conditions where they recapture this initial bonus. Also, there are conditions where you can start withdrawing some money without fees (Free withdrawal amount).
You may want to go here and try to figure out which product they have.

http://www.axa-equitable.com/annuities/accumulator/annuity.jsp
Image
User avatar
tarnation
 
Posts: 2158
Joined: Thu Apr 26, 2007 12:36 am

Postby mickeyd » Thu Oct 22, 2009 6:22 pm

In the OP you stated :Parents are looking into moving their Traditional IRA away from what AXA Equitable Calls their Accumulator Plus IRA.

Now, you indicated that they have already jumped in (no $31,000 bonus without jumping in and "signing on the line which is dotted.")

Read all of the small print that may or may not have been presented to your parents.

Your folks are probably being misinformed/misdirected/bamboozled by an insurance agent who has a big broad smile on his/her face tonight in anticipation of a big fat commission check soon.
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle
User avatar
mickeyd
 
Posts: 3634
Joined: Fri Feb 23, 2007 3:19 pm
Location: Deep in the Heart of South Texas

Postby eminded26 » Thu Oct 22, 2009 6:45 pm

That's correct -- they've been in the fund for 4.5 years by now.
They and I never chatted about it until the past couple weeks.
At which point I started asking some questions.
eminded26
 
Posts: 33
Joined: Fri Aug 07, 2009 2:05 pm

Postby ruralavalon » Fri Oct 23, 2009 5:11 pm

Find out, what the penalty is for surrender right now? For surrender at 5 years? At 6 years? At 7 years?

Then you and your partents can make a decision about when is the best time to bail out of this monster.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
User avatar
ruralavalon
 
Posts: 5269
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Postby tarnation » Fri Oct 23, 2009 5:38 pm

ruralavalon wrote:Find out, what the penalty is for surrender right now? For surrender at 5 years? At 6 years? At 7 years?

Then you and your partents can make a decision about when is the best time to bail out of this monster.

My guess is the bean counters have been careful to set the terms so there is no good escape, i.e. if you take it out earlier you pay surrender fees, if you leave it in, you pay small ongoing fees that will sum to be roughly equivalent. In that case it would be a sunk cost; just pay surrender fees and move on.
Image
User avatar
tarnation
 
Posts: 2158
Joined: Thu Apr 26, 2007 12:36 am

Re: AXA Equitable Accumulator Plus IRA vs Vanguard Index Fun

Postby Taylor Larimore » Fri Oct 23, 2009 8:01 pm

eminded26 wrote:Parents are looking into moving their Traditional IRA away from what AXA Equitable Calls their Accumulator Plus IRA.

From what I could gather, the funds it's investing in and expenses are such:

EQ/Common Stock Index
EQ/International Core PLUS 0.83%
EQ/BlackRock International Value - 1.43% (5.25% front-load)
EQ/T. Rowe Price Growth Stock - 0.73%
EQ/GAMCO Small Company Value - 1.12%

They're looking at a simple Index fund, like a Vanguard Target Retirement 2015, instead. Expense ratio - 0.18%.

This AE product was sold to them by a broker at Wachovia.

Anybody have any good or bad feelings about either product?


Hi Emend:

Several years ago we allowed two Equitable salesman to try and sell us an "Accumulator Plus" (Variable deferred annuity.) It is among the most complicated financial products I have ever seen. I couldn't understand it and I was once an insurance salesman. The two Equitable salesmen couldn't answer anything beyond very basic questions.

I still have the Prospectus. It contains 176 pages of small legalized print. :twisted:

Fortunately, I remembered financial expert Jane Bryant Quinn's sound advice:

"You shouldn't buy anything too complex to explain to the average 12 year old."

You and your parents should try to get all the information you can to make an informed decision.
"Simplicity is the master key to financial success." -- Jack Bogle
User avatar
Taylor Larimore
Advisory Board
 
Posts: 20203
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Postby MossySF » Fri Oct 23, 2009 10:17 pm

You might want to double check all the details. The entire scenario as laid out doesn't sound right. For example, you say the account is several hundred thousand dollars. Hence my back-of-the-napkin guess from the 31K credit is $620K -- ie, 5% of the initial amount to credit against the typical 5% sales load.

But to have $620K in a Roth IRA is unlikely for most people. That would require saving it all up in a 401K, rolling over to an IRA and then converting to a Roth IRA after paying a huge whopping tax bill on the conversion.
User avatar
MossySF
 
Posts: 1797
Joined: Thu Apr 19, 2007 9:51 pm

Postby eminded26 » Tue Nov 10, 2009 5:31 pm

So here's the story. We spoke to the "advisor" and there are pretty significant surrender fees for this thing.

fee to surrender in 2009: $25,380
next year 2010: $21,150
year after 2011: $16,920
and finally 2011: $12,690
and finally 2013: $0

original investment was around $423k back in 05.
it's now worth somewhere around $480k.

is it worth paying the fee and getting out now?
eminded26
 
Posts: 33
Joined: Fri Aug 07, 2009 2:05 pm

Postby GG » Tue Nov 10, 2009 8:49 pm

So you wait 4 years and save $25k in surrender or you get out now and save 2% per year ($40k) in extra expense over the next 4 years. The calc is no more complicated than that.

I promise the savings is better than 2% per year.

I know that AXA is crap.

No deabte needed.
GG
 
Posts: 447
Joined: Mon Nov 17, 2008 8:09 pm


Return to Investing - Help with Personal Investments

Who is online

Users browsing this forum: asif408, Badmash, Baidu [Spider], Bing [Bot], JW Nearly Retired, Kennedy, niceguy7376, outdoorguy, Tramper Al, Twins Fan, ZiziPB and 62 guests