Submitted by Anonymous on
Most annuities come with something referred to as a surrender charge.
Surrender charges often last for 5 - 8 years. They may start as high as 8 or 9 percent during the first year, and then scale down to 0 after a few years.
What this means is that the owner of the annuity is charged if they "surrender" (basically cancel or exchange the product) during the surrender charge period.
So, if a product has a 6 percent surrender charge during the second year and you choose to cancel during the second year, you will be charged 6 percent of the amount of your premium.
If you "invested" $100,000 in the annuity, you would be charged $6,000 for cancelling during the second year.
Surrender charges are a big issue and sticking point for annuities.
The fact that Vanguard has figured out a way to remove this unattractive feature from their variable annuity makes it one of the best products in the market.
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