The promises in some variable annuities are too good to be true–a realization being made by the insurers that made them. You can learn more here:
Variable annuities combine a 401(k)-like investment account with the equivalent of an insurance policy. They appeal to investors approaching retirement with a promise of guaranteed regular payouts that could reset higher if the policy’s underlying investments fare well.
Yet the products usually have higher fees than plain-vanilla “immediate” annuities, which deliver an annual payout in return for a lump-sum payment. (Variable annuities are complicated enough—and consumers are confused enough about them—that the Securities and Exchange Commission issued an investor bulletin this month explaining how they work.)
Some insurers that sold products with rich guarantees are trying to dissuade longtime customers from holding on to their contracts. In addition to offering to buy back variable annuities with benefit guarantees, insurers are limiting investment choices, raising fees and blocking additional account contributions.
The goal is to limit future payouts on accounts whose balances have tumbled at the same time ultralow interest rates hurt insurers’ own investment returns.
Insurers have sent out a flurry of letters in the past year informing annuity owners that their accounts are being shifted into more-conservative investment options—unless the owners opt out.
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