Annuities - Don't Put Your IRA In A Variable Annuity - Part 2

Last week I shared with you the real reason advisors push IRA accounts into variable annuities: the commission. If you?re getting ready to retire with a large IRA rollover, or your current IRA account is nearing the end of any surrender penalties, chances are you?ll be pitched this product. So this week I?m going to reveal more secrets about the truth behind the variable annuity sales pitch.

One of the biggest draws advisors use to get you to take the plunge is the promise of the big bonus. They?ll pay you 6%, 8% or even 10% extra, right up front, just for putting your money into their variable annuity. Sounds great, doesn?t it? Who wouldn?t want such a big boost to their nest egg, especially with the stock market returns of late? But remember, there?s no such thing as a free lunch.

In return for this lovely bonus, you end up paying higher recurring annual fees, usually .15% higher (or more) than regular variable annuities. These fees are charged on all of the money in the annuity and are a continued drag on performance. Surrender penalties are higher and longer, too. The truth is that when you take into account the increased fees and the extra years you have to stay in the annuity, you really aren?t getting a ?bonus? at all!

These bonuses aren?t just used to entice you to invest your original IRA rollover when you retire. They?re also used to encourage you to transfer out of an annuity you already own that?s still in the penalty period. Advisors will tell you that the bonus on this ?new-and-improved? annuity will ?pay you back? for the penalty you?ll pay to get out of your old commission-based investment. The truth is, by getting you to switch to the ?bonus? annuity, they earn a fat fee up-front. You end up with pretty much the same thing you had but now are locked into it for much longer. What kind of a ?deal? is that? The promise of multiple investment choices is another feature of the variable annuity sales pitch that doesn?t live up to its claim. It?s true that many variable annuities offer a multitude of mutual fund choices in various sub-accounts, including funds investing in bonds, small companies, large companies, international stocks and more. Surely out of all of these choices, anyone could create a balanced well-performing portfolio, right?

Not necessarily. It?s sort of like fishing. Who wants to fish in a pond full of minnows? Wouldn?t you rather drop your line where you have a greater chance of catching the big one? The mutual fund universe is full of thousands of choices. But only a small group of them are consistent top performers. Unfortunately, few variable annuities offer these big fish.

Some variable annuities feature a well-known fund already offered to the general public. But beware. This same fund will have much higher management fees within the annuity than it does outside of it, hampering its performance. I believe insurance companies make special deals with mutual fund companies to gain access to their management and then charge higher fees.

When you invest your money into a variable annuity, you?ll no longer have control over the choices at your disposal. The insurance company can change the investment choices whenever they want to and you have no recourse. Since your money is locked in for years, it will be very costly to change course a few years down the road should you be dissatisfied. What kind of choice is that?

So here?s the bottom line: variable annuities make big promises but don?t really deliver. Every feature they offer -- be it a big bonus, a multitude of investment choices, death benefit, or a guaranteed income stream -- comes at a very high price. High management fees and long, costly surrender penalties hinder your performance and rob you of your flexibility and control. The ones making the most money off of variable annuities are the advisors and the insurance companies. It turns out that variable annuities are a great investment?for them.

If you?d like free, clear, unbiased advice submit your questions to http://www.guardingyourwealth.com/askjeff.htm. Also, see answers to questions other readers have asked onthe Q&A page at http://www.guardingyourwealth.com.

Mr. Voudrie is a Certified Financial Planner, nationally syndicated newspaper columnist and President of Legacy Planning Group, Inc., a Private Wealth Management Firm in Johnson City, TN. He can be reached at jeff@guardingyourwealth.com

Nationally-syndicated financial columnist and Certified Financial Planner? Jeffrey Voudrie provides personal, in-depth money management services and advice to select private clients throughout the USA. He?ll answer your financial question ? FREE at http://www.guardingyourwealth.com

Annuities - Don't Put Your IRA In A Variable Annuity

If you?ve talked to a broker or agent about rolling over your retirement account, there?s a good chance the advisor recommended you invest in a Variable Annuity. Don?t do it! I believe the only reason a variable annuity is recommended for an IRA is so the advisor can earn more money. Let me explain.

There?s a high probability that if an advisor doesn?t recommend an Equity-Indexed Annuity for your IRA rollover, a Variable Annuity will be recommended instead. ?There are so many advantages to a variable annuity versus a mutual fund?, you?re told. I disagree. It?s advantageous for the advisor, not the investor.

In this article, I?ll debunk the two main arguments used in selling variable annuities. First, that you don?t pay a commission and secondly, the importance of the death benefit guarantee. I?ll explain how you pay dearly for both.

One of the main sales ?hooks? used in selling a variable annuity is that you don?t have to pay a commission. That can be very compelling when compared to a mutual fund in which you pay the all the commission up-front. Many advisors will even say that they get compensated by the insurance company, not you. Do you really believe that?

Insurance companies are not charitable organizations. If they are paying the broker, they?ll recoup those costs from you?the costs are just hidden so you don?t think you?re paying a commission.

The second main argument for using a variable annuity for an IRA is the death benefit (not offered with a mutual fund). ?That way you?ll never have to worry about your beneficiary getting less than you invested?, the thoughtful advisor says. This feature may seem nice, but you end up paying through the nose for it.

With all variable annuities there is a Mortality and Risk Expense (M&E) charge. Most variable annuities sold through commission-based advisors have an M&E charge of 1.45%. This is an annual fee that is charged against the entire value of the account, not the original investment. On a $500,000 investment that amounts to $7,250 the first year. If your account doubles in 10 years, you?d pay $14,500 that year.

Note that the M&E charge is in addition to the underlying money management fees charged by the people actually making the investment decisions. Their fees can range from .70% to 1.5%. All told, the fees associated with most variable annuities range from 2-3% per year. That?s a 2-3% hole you start in each year. That?s $10,000-$15,000 each year on a $500,000 investment?and that expense increases as the value of the account increases.

Do you really think it costs $10,000-$15,000 a year to cover the cost of the insurance associated with the death benefit? Of course not. The full $500,000 in our example isn?t really being insured, either. They?re only insuring the amount of loss. So if the investment loses 10%, the actual amount of ?insurance? is $50,000. Even when the investment is worth more than you paid you continue to be charge M&E.

So the death benefit associated with a variable annuity is either the most expensive insurance you?ll ever buy, or it pays for more than insurance. The M&E is where the insurance company makes their money. More importantly, the M&E is where the insurance company gets paid back the money it paid your advisor in commission. Here?s proof. The M&E on variable annuities offered by Vanguard (in which no one earns a commission) is about .60%. That?s over three quarters of a percent less than the 1.45% being paid to the commission-based advisor.

The real reason that you are recommended a variable annuity for your IRA isn?t that it?s better for you. It?s because it?s better for the advisor. If you invest $500,000 in a commission-based mutual fund, the advisor?s gross commission will only be about $10,000. The same investment in a variable annuity would yield gross commission to the advisor of $30,000-$35,000 or more!

If an advisor can earn 3 times more by getting you to invest in a variable annuity instead of a mutual fund, which do you think will be recommended?

Don?t fall for the ?put your IRA in a VA? trap. You are smarter than that.

Get free, clear, and unbiased advice by sending your questions to http://www.guardingyourwealth.com/askjeff.htm

Mr. Voudrie is a Certified Financial Planner, nationally syndicated newspaper columnist and President of Legacy Planning Group, Inc., a Private Wealth Management Firm in Johnson City, TN. He can be reached toll-free at 1-877-827-1463.

Nationally-syndicated financial columnist and Certified Financial Planner? Jeffrey Voudrie provides personal, in-depth money management services and advice to select private clients throughout the USA. He?ll answer your financial question ? FREE at http://www.guardingyourwealth.com

Life Annuity; Yes Or No?

A life annuity is a financial arrangement that allows a life insurance company to provide a series of future payments to an annuitant for a certain sum of money. The payment stream based upon the life expectancy of the annuitant is of unknown length but generally guaranteed to continue for a certain number of years.

Also it is possible to have a joint contract so that the payments stop upon the death of the second of two annuitants ( i.e., a joint and last survivor life annuity).

A life annuity can negatively affect an annuitant who dies before recovering his or investment. Such a situation is rememdied or offset, by the increase in income not otherwise available and the normally favorable tax consequences. Thus each annuitant must decide whether to sacrifice use of the money in favour of a greater return. If you need a greater guaranteed income then that is what a life annuity is designed to do.

Life Annuity Facts

A life annuity has a pro and con reputation from both the annuitant's and the issuer's viewpoint. Who need income or are financially unskilled. Yet, the annuity is an important financial tool for those.

Potential life annuitants are familiar with the ideas involved with life annuities through knowledge of their own pension plan from a business or government position. Most people believe that the odds are stacked in favor of the issuer, though issuers have grappled with the risk these policies bring.

Life Annuities Cost

From the issuer's viewpoint, there are many technical factors that determine the cost of an annuity payment from the life expectancy of the annuitant and the yields on investments made. There are expenses (including distribution costs) related to managing the money and risk management cost for the issuer which can balloon if annuitant's returns are higher.

So Should I Be Looking At A Life Annuity

You should be looking at a life annuity if your age and the prevailing long long term interest rates will guarantee you a superior after tax return. You may be able to generate more income if you actively manage your income but this takes time and expertise. Or perhaps you are just fed up with worrying about the net return and want a life annuity to provide you with a guaranteed income.

There is no easy answer to this life annuity question as we all differ. And often, if there is a large age difference in a marriage, points of view can be very different.

Overall it is necessary to consider all the alternative such as bonds or fixed interest rate deposite along with a life annuity.

Ivon T. Hughes of The Hughes Trustco Group is the author of the Life Insurance Handbook: How To Get The Best & Cheapest Life Insurance available FREE to all new subscribers at: http://www.hughestrustco.com

Radio Talk Show Annuity Selling System

Pre-selling skills are as important as closing skills and more important than presentation skills. The more you pre-sell, the less you have to sell during the face-to-face phase. The more your prospects perceive you as the expert, the less you have to convince them you are.

Our new Radio Talk Show Annuity Selling System engages the power of perception in your prospects. It is not actually a selling system. It?s a pre-selling system. Pre-selling is the easiest, most time- and cost-effective part of the sales process.

Here's an example right out of history. In 218 B.C. when Hannibal led his army of 38,000 foot soldiers, 8,000 cavalry, and 37 war elephants across the Alps to do battle with the mighty Roman army, the march itself, not the ensuing battles won or lost, established him as the greatest military strategist in history. So admired and feared was Hannibal that, by reputation alone, many battles along his historic march to northern Italy were won without a single sword unsheathed, without a drop of blood shed.

This story demonstrates the awesome power of perception. This strategy applied to selling annuities will make you the undisputed expert in your field.

If you were your prospect, would you rather sit down with a ?nobody special? insurance agent or a well-known expert on the subject of financial retirement solutions, someone you listen to on the radio? You don't get a second chance to make a first impression.

Look at the world from your prospect?s point of view. Who would you rather discuss your retirement nest egg with, (a) an insurance agent who contacts you through telemarketing or direct mail, asking for an appointment, or (b) a prominent expert with his or her own radio talk show covering subjects like, How to Stop The IRS From Plundering Your Social Security, or Three Easy Steps to a Guaranteed Income For Life, or Why Your IRA Is a Ticking Tax Time Bomb and How To Defuse It.

An Annuity Selling System That Makes You The Expert

It?s a fact that 96% of the U.S. population listens to the radio at least once a week and 75% listen EVERY DAY. This is more than any other medium. Listeners pay more attention to guest speakers than they do to commercials. Which would you rather listen to, a commercial, or a guest with an amazing story to tell, a guest who can make you laugh, teach you something new, save you money, save you time, open up a controversial topic for you to argue about?

Notice I did not suggest a radio show guest who talks about ?why you should buy fixed annuities,? or even ?what an annuity is.? Your topic is your hook. Your hook needs to pull listeners in with the strength of a black hole.

Once your listeners tune in, you don?t want them to feel tricked because you launched into a sales pitch for a product. You want to let your personality radiate, to reveal the three-dimensional human being you are, and to give genuine take-home value by way of solutions to their financial problems.

Remember, nobody buys annuities; they have to be sold. Nobody wants you to sell them a product, but everybody wants you to help them discover a solution. If you can learn how to do this in a radio talk show format, reaching tens of thousands of listeners at a time, you will truly position yourself as the popular, trusted expert while propelling your insurance practice to record heights. You will have your own very personal pre-selling annuity selling system.

But who has time to script a compelling radio show? Should you just wing it and hope for the best? How do you tie your theme to a hot topic that people will clamor to listen to? Should you go live or pre-recorded? Do you take calls, give away freebies, go solo or be interviewed by a host? Yikes! Too many questions and not enough answers!

Until Now

Now, a limited number of annuity agents have a rare opportunity to participate in "Safe Money Secrets," our turnkey Radio Talk Show Annuity Selling System, with exclusive broadcast rights in protected territories.

If you are a licensed life insurance agent not currently contracted through Life Sales and wish to begin or advance your career selling fixed annuities, you may qualify for our Radio Talk Show Annuity Selling System. Come onboard with two or more of our carriers ? Allianz, ING, Sun Life Financial, or American Equity ? and receive 200 leads as a signing bonus. Then with your first 3000 QPCs (roughly $40,000 in paid business depending on carrier and product) within three months of coming onboard, you?ll be interviewed as a guest expert on "Safe Money Secrets" and receive your first half-hour pre-recorded radio show with exclusive broadcast rights, ready for airing in your local market.

We provide you with a script of all the questions, coaching on all the answers, anecdotes, segues, ways to make the phone ring and generate warm, pre-sold prospects. It's all done over the phone. I call you as host, interviewer and show producer. You are the exclusive guest expert in your marketing area. You speak from the comfort of your office or home with all your notes at hand, in your pajamas if you like.

I use professional recording and editing hardware and software to make you sound like a professional radio talk show star. I burn a broadcast-quality CD-ROM of your show, which you take to your local stations and shop the best demographics, listening audience, frequency, time slot, and rates.

Simply click on the link below to contact me. Then, as Charles Osgood says, "I'll see you on the radio."

http://www.Free-Insurance-Leads.com Gary Le Mon is a wholesale distributor of fixed indexed annuities for Allianz, American Equity, Sun Life Financial, and ING. Author and developer of the Safe Money Seminar, a financial planning seminar for Seniors, Gary serves as guest speaker on behalf of agents and agencies nationwide. He is coach, mentor and motivator to over 700 general agents in his insurance marketing organization, InsuranStar Marketing.

Best Fixed Annuity Coverage - How To Find It

To get the best fixed rate annuity coverage you definitely need to shop around to find a good deal. The easiest way to do this is to get on the Internet and start comparing insurance rates. There are hundreds of sites on the World Wide Web that specialize in offering charts and product sheets so that you can compare different offers side by side. These types of insurance comparison web sites that make it quick and easy for anyone to compare different offers and interest rates, even if you have never taken out insurance or a pension before.

The reason that most people end up paying too much for their fixed annuity plans is that they don't bother to shop around for the best annuity coverage. It is such a tedious job that sometimes they just take the first deal that they run across.

This is just not the way to go about shopping for the best fixed annuity coverage. You should at least go to the same type of time and trouble that you would to shop around to find the best credit cars, mortgage or car insurance. You should also do this in a short amount of time as it is inevitable that the insurance company will eventually ask for your social insurance number. This of course is used to check your credit rating, which can also have an impact on the rate of interest that you are offered.

Another thing to look at, besides price is just exactly what the plan actually covers. Just because it is cheap does not mean it is the best fixed annuity coverage for you. Finding the ideal plan can mean taking many other things into consideration besides price including fees, the price of withdrawal penalties and the structure of the plan. Most of this information can be found in the fine print of your agreement with the company, which of course you should ask to see and read thoroughly before signing on the dotted line.

Tiffany Walker has finally revealed her annuity secrets online. Read the latest by clicking here: Best fixed annuity coverage.

Fixed Annuity Company - The Concept

The elders of the Presbyterian Church first brought the concept of a fixed annuity company to light in the mid seventeenth century. The idea was to provide a yearly pension for widows and the elderly members of the clergy. The concept of the fixed annuity company hasn't changed much in the present day. Perhaps the only difference is the tax deferment that is characteristic of most modern annuities.

The idea behind an annuity is that they allow you to invest in a tax-free fund for a number of years until you are ready to withdraw money. Once you withdraw from the fund you would be taxed on it as you would regular income. In the financial world the process of providing you with a check that you cash every year from your saved taxed deferred funds is called annuitization.

Every fixed annuity company today will also offer you the guaranteed income for life option. You can also opt to be paid the annuity for a certain specified period of years which of course if very handy if you ever suffer an illness or disability.

There is not really such a thing as a fixed annuity company. If you went through the Yellow Pages you probably would not find such an entity. Most of the time it is an insurance company offering you the fixed annuity. Annuities are also sold through licensed insurance brokers and agents. Using a broker to find an annuity deal is a good idea as it allows you to compare various interest rates offered by different insurance companies.

The reason that it is a good idea to invest in products offered by a fixed annuity company is that if it ever goes out of business that the other insurance companies in the state where the defunct insurance company is are obligated by law to honor the conditions of your annuity.

Tiffany Walker has finally revealed her annuity secrets online. Read the latest by clicking here: Fixed Annuity Company.

Love The Thrill of Risk? Invest in an Annuity!

Love The Thrill of Risk? Invest in an Annuity!

 by: Stephen Bucaro

With the stock market in steep decline, people are looking for safe places to invest their savings. Many banks and investment companies are pushing annuities. Annuities offer a higher interest rate than CD's, but are they safe?

You could view an annuity as a tax deferred CD. You don't pay taxes on the interest until you start drawing from the annuity. But there are some important differences between an annuity and a CD.

An annuity is a product offered by an insurance company. With giant corporations like Enron, Kmart, Worldcom, and United Airlines going bankrupt, can you guarantee that the insurance company won't fold, leaving you with nothing? Insurance companies are insured by re-insurers, like General Re. But it seems no matter how large a company is, you can't be sure it won't fold. The bankruptcy of a large insurance company might cause the re-insurer to collapse along with it.

Bank CD's are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $100,000 per bank. The FDIC is a branch of the U.S. Government, who, as you know, are the people who print the money. If they go bankrupt, we'll have more to worry about than just losing our savings!

A new type of annuity called a charitable gift annuity has come on the market recently. These are issued by charity organizations. You give your money to the charity, you receive a tax benefit, and in exchange the charity promises you a fixed payment for life. Unfortunately, this scheme has become a mode of operation for con artists.

The charitable gift annuity has been added to top ten scam list of the North American Securities Administrators Association. They explain that charitable gift annuities are subject to virtually no federal regulation. Here in Arizona, 430 investors lost their savings in a ponzi scheme run by the Mid-America Foundation Inc.

Banks and investment companies hawking annuities promote the higher than CD interest rates, but they fail to reveal the hidden fees and high early withdrawal penalties. If you need to access your annuity before age 59, you could be subject to a 10 percent penalty.

With the recent bankruptcies, and discovery that many giant corporations have been cooking their books for years, I feel it's best to play it safe. If you love the thrill of risk, or if you have already purchased an annuity, I wish you luck. As Will Rogers said, "I am not as concerned about the return ON my money as I am about the return OF my money".

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