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Please help me decipher this Variable Annuity - Details in post

Posted: Thu Feb 21, 2019 4:28 pm
by hbus1300
Short story is I just found out my father has this. I thought he was in a Inherited IRA with mutual funds, and it turns out it is a Inherited IRA but its also a Variable Annuity. I'm a proud vanguard customer and love my index funds. I have a low level of knowledge as it relates to Variable Annuities, mainly because they appear to be a garbage product conceived to play on fear and exist to line the pockets of brokers with commissions and fees. But perhaps i'm wrong.

Regardless from the information listed below, is it really $7506.24 to get out of this? This is like an investment timeshare, so good you have to pay to make it go away.

My end goal is to get him out of this and get his assets transferred to Vanguard and let him use their managed services for .3%. I haven't gotten all the details yet, but i'll probably have a stroke when I see what the fee's are in this thing.

Thank you for any feedback



Policy Values
Calculated RMD Value: $ 6,211.83
Current Protected Payment Amount - Non-Lifetime: $ 10.57
Current Protected Payment Base Amount - Non-Declining: $ 119,437.14
Death Benefit: $ 148,230.20
Gross Death Benefit: $ 148,230.20
Original Investment Value: $ 132,860.30
Policy Fee: $ 0.00
Projected Guaranteed Income Base Amount: $ 7,307.32
Protected Payment Amount: $ 10.57
Protected Payment Base Amount: $ 119,437.14
Required Minimum Distribution Basis: $ 133,554.43
Surrender Charge Amount: $ 7,506.24
Surrender Value: $ 140,723.96
Total Annual Protected Payment Amount - Non-Lifetime: $ 7,307.32
Total Premium: $ 132,860.30
Total Withdrawal: $ 13,423.16
Year End Value: $ 133,554.43

Policy Dates
Received: 09/23/2016
Issue Effective: 10/03/2016
Valuation Date: 02/20/2019
Maturity: 10/03/2050
First Payout: 11/15/2017
Current Payout: 11/15/2018

Re: Please help me decipher this Variable Annuity - Details in post

Posted: Thu Feb 21, 2019 5:39 pm
by Stinky
Bad news - looks like there’s a $7500 surrender charge.

Good news - even after taking the surrender charge into account, looks like the surrender value is about $7000 more than the original premium. So there’s a gain on the contract.

Re: Please help me decipher this Variable Annuity - Details in post

Posted: Fri Feb 22, 2019 11:09 am
by hbus1300
Thanks. That was my take as well there. Need to find out how long we have for that surrender charge to diminish.

Later yesterday I also found that this same "advisor" transferred 50k out of my dads 401k into ANOTHER annuity. I don't have the details on that trash yet. But that seems borderline criminal doing that to someone. He'd have been better off leaving it in his workplace 401k than lining this [(removed) --admin LadyGeek] pockets.

Re: Please help me decipher this Variable Annuity - Details in post

Posted: Fri Feb 22, 2019 12:20 pm
by Stinky
hbus1300 wrote:
Fri Feb 22, 2019 11:09 am
Thanks. That was my take as well there. Need to find out how long we have for that surrender charge to diminish.

Later yesterday I also found that this same "advisor" transferred 50k out of my dads 401k into ANOTHER annuity. I don't have the details on that trash yet. But that seems borderline criminal doing that to someone. He'd have been better off leaving it in his workplace 401k than lining this a$$hats pockets.
Many VA surrender charges decrease at 1% per year. If that’s what you have, it may make sense to surrender now, since the internal fees in the VA are probably much higher than 1% per year.

Agree on the scuzziness of the advisor. Behavior is not illegal, but certainly not in the best interest of the client.

Re: Please help me decipher this Variable Annuity - Details in post

Posted: Fri Feb 22, 2019 12:59 pm
by David Jay
hbus1300 wrote:
Thu Feb 21, 2019 4:28 pm
This is like an investment timeshare, so good you have to pay to make it go away.
Yup. The “advisor” got paid - typical commission is 8% - and that comes out of the fees over the years. If you surrender then the annuity issuer doesn’t get the fees so in effect your Dad has to cough up the advisor’s commission.

I agree with others, take the hit now.

It will also simplify RMDs. It is not possible for a mere mortal to figure out the RMD on a variable annuity.

Re: Please help me decipher this Variable Annuity - Details in post

Posted: Fri Feb 22, 2019 1:29 pm
by bighatnohorse
It looks like a sucky variable annuity. I'd pay the cash out and move the principal to Vanguard.
The early cash out charge probably declines over a period of six or seven years - you could wait for it to diminish - the cash out charge details should be in the contract within the first ten or fewer pages.

Re: Please help me decipher this Variable Annuity - Details in post

Posted: Thu Mar 14, 2019 2:04 pm
by hbus1300
Update to this saga. Reviewed the book like "policy" in detail and it turns out he was sold an optional 4 year surrender period. So while he's paying an extra .40% for that privilege, at least he'll be able to move to vanguard sooner and without further penalties.

I wish I could file an SEC complaint on this guy, as my dad didn't know what he was doing. But he's of sound mind and signed the docs, so I doubt there is any recourse. Perhaps BBB complaint as this is a RIA type place.

Re: Please help me decipher this Variable Annuity - Details in post

Posted: Thu Mar 14, 2019 2:34 pm
by DarkHelmetII
If this is indeed a Variable Annuity within an IRA, perhaps show the below excerpt from the Series 6 Securities License Exam Manual (Kaplan) in conjunction with a request to get the surrender charge waived. "Withdrawals from a VA are tax deferred so there would never be a reason to place one in a tax-favored account like an IRA."

Image

Image

Re: Please help me decipher this Variable Annuity - Details in post

Posted: Thu Mar 14, 2019 3:05 pm
by Dottie57
Is there person who sold the VA part of a large brokerage or do they work alone? If a large brokerage or company, send the Info above to upper management and try for recovery of $.

Re: Please help me decipher this Variable Annuity - Details in post

Posted: Thu Mar 14, 2019 3:19 pm
by hbus1300
Its a small Registered Investment Advisor situation. There are three partners and a small staff that work out of an office. They're not large.

One VA is in a Inherited IRA the other VA is in a rollover IRA from 401k. I'm not sure that rule would apply in this case, but i'm going to research that.

Re: Please help me decipher this Variable Annuity - Details in post

Posted: Thu Mar 14, 2019 3:23 pm
by David Jay
hbus1300 wrote:
Thu Mar 14, 2019 3:19 pm
VA is in a rollover IRA from 401k.
That is pretty much advisor malpractice. Just to line their pockets.

Re: Please help me decipher this Variable Annuity - Details in post

Posted: Thu Mar 14, 2019 3:37 pm
by DarkHelmetII
hbus1300 wrote:
Thu Mar 14, 2019 3:19 pm
Its a small Registered Investment Advisor situation. There are three partners and a small staff that work out of an office. They're not large.

One VA is in a Inherited IRA the other VA is in a rollover IRA from 401k. I'm not sure that rule would apply in this case, but i'm going to research that.
Ultimately the VA has to have been sold by a (relatively) large life insurance company. I would put pressure on the insurer directly to waive the surrender fee on the basis that their agent violated suitability guidelines.

Re: Please help me decipher this Variable Annuity - Details in post

Posted: Thu Mar 14, 2019 6:42 pm
by David Jay
DarkHelmetII wrote:
Thu Mar 14, 2019 2:34 pm
If this is indeed a Variable Annuity within an IRA, perhaps show the below excerpt from the Series 6 Securities License Exam Manual (Kaplan) in conjunction with a request to get the surrender charge waived. "Withdrawals from a VA are tax deferred so there would never be a reason to place one in a tax-favored account like an IRA."

Image

Image
The information in this post should be in the Wiki.

Re: Please help me decipher this Variable Annuity - Details in post

Posted: Thu Mar 14, 2019 10:04 pm
by investorag83
David Jay wrote:
Fri Feb 22, 2019 12:59 pm
hbus1300 wrote:
Thu Feb 21, 2019 4:28 pm
This is like an investment timeshare, so good you have to pay to make it go away.
Yup. The “advisor” got paid - typical commission is 8% - and that comes out of the fees over the years. If you surrender then the annuity issuer doesn’t get the fees so in effect your Dad has to cough up the advisor’s commission.

I agree with others, take the hit now.

It will also simplify RMDs. It is not possible for a mere mortal to figure out the RMD on a variable annuity.
Very little of this is accurate and your other posts are inaccurate as well. It doesn’t make the RMD more difficult. It could actually result in more income for the policy holder. The 8% commission number is a ridiculous exaggeration. That said, I’m not saying I agree with this as it’s not a practice of mine, but there’s something everyone on here needs to understand:

Before this transaction, there were other options. But now that it’s done, the only ‘malpractice’ that would result in a suit would be if a licensed advisor suggested to pay the surrender penalty only to go into something else. There is NOTHING you could move to now that a compliance official would sign off on a 7500 surrender fee if it’s going to stay in the market. Going to a lower cost portfolio is not enough. You’d be taking what you feel is a bad decision and making it worse (and it may not be a bad decision based on the situation...who knows).

I completely agree with the boglehead philosophy but this is not as cut and dry as some of you make it seem.

For the OP: which variable annuity is it?

Re: Please help me decipher this Variable Annuity - Details in post

Posted: Fri Mar 22, 2019 3:13 pm
by hbus1300
investorag83 wrote:
Thu Mar 14, 2019 10:04 pm
David Jay wrote:
Fri Feb 22, 2019 12:59 pm
hbus1300 wrote:
Thu Feb 21, 2019 4:28 pm
This is like an investment timeshare, so good you have to pay to make it go away.
Yup. The “advisor” got paid - typical commission is 8% - and that comes out of the fees over the years. If you surrender then the annuity issuer doesn’t get the fees so in effect your Dad has to cough up the advisor’s commission.

I agree with others, take the hit now.

It will also simplify RMDs. It is not possible for a mere mortal to figure out the RMD on a variable annuity.
Very little of this is accurate and your other posts are inaccurate as well. It doesn’t make the RMD more difficult. It could actually result in more income for the policy holder. The 8% commission number is a ridiculous exaggeration. That said, I’m not saying I agree with this as it’s not a practice of mine, but there’s something everyone on here needs to understand:

Before this transaction, there were other options. But now that it’s done, the only ‘malpractice’ that would result in a suit would be if a licensed advisor suggested to pay the surrender penalty only to go into something else. There is NOTHING you could move to now that a compliance official would sign off on a 7500 surrender fee if it’s going to stay in the market. Going to a lower cost portfolio is not enough. You’d be taking what you feel is a bad decision and making it worse (and it may not be a bad decision based on the situation...who knows).

I completely agree with the boglehead philosophy but this is not as cut and dry as some of you make it seem.

For the OP: which variable annuity is it?

Not sure I understand "which variable annuity is it?" as a question. He was sold two it turns out. The initial was a inherited IRA account type with the VA in it. The VA is with Jackson and fortunately he was sold the option of a four year surrender period so we can get out of this thing in 2020.

Working through this I found the same salesman sold him on moving money from his current workplace 401k to a traditional IRA type account and purchased another VA within that, Transamerica is that insurance company. This one also has a 4 year surrender period that we'll be taking advantage of in 2020.

It sounds as though you are someone who sells these. Perhaps you could expound on some of the benefits? And why it would make sense to take funds from his workplace 401k while he's still contributing and working, to move it to a fee ladden VA? I mean other than the salesman had budgets to hit and bills to pay.

Re: Please help me decipher this Variable Annuity - Details in post

Posted: Fri Mar 22, 2019 5:14 pm
by investorag83
A quick glance to Jackson's website shows 5 Variable annuities available (Elite Access, Elite Access Advisory I, Elite Access Advisory II, Perspective and Perspective Advisory). Those are just the ones available now...the one you're referencing could be an older one.

Give details on which one it is, which features he was sold, and I can help try and make sense of it.

I am in the industry, it's rare that I use variable annuities, but they CAN make sense. It all depends on how you intend to use it.