Surrender Charge

A charge to annuity contract owners who withdraw funds during the “surrender charge period” or the first several years of the contract. Surrender charges are also referred to as surrender fees and early withdrawal fees. The specific terms will vary among insurance companies and contracts, but surrender charges are typically assessed as a percentage of the contract value for withdrawals that exceed a certain percentage of the contract value. For example, an annuity may have a 7% surrender charge for any withdrawal in excess of 10% of the premiums paid. Assume that a person paid $100,000 in premiums and withdraws $50,000 during the first year. In this case, the surrender charge would be $3,500 ($50,000 x 7%). The surrender charge will often reduce a certain percent each year—typically 1% each year—until it disappears. The expenses are significant, so it is critical to ask about and understand surrender charges before entering into a new annuity contract or considering a 1035 exchange.

The Pitfalls of Using Group Annuities as a Wrapper for 401k Plans

A very good article in Forbes magazine discusses the many downsides of using group annuity contracts as a wrapper for 401k plans. This is not to be confused with 401k or defined contribution plans that offer an annuity option within their plans or an annuity option outside of the plans to participants who are retiring or leaving the company. In fact, most of the group annuity wrappers provide no ability to annuitize . The practice is especially common among 401k plans offered by smaller...

A Changing Variable Annuity Landscape -- What to Watch for in the Next Few Years

This is the second part of an interview with...

A Changing Variable Annuity Landscape -- The Consumer Perspective

This is the first part of an interview with Ryan Hinchey.

Ryan is a consulting...

Understanding the Basics of Annuity Fees and Expenses

A basic checklist from a top financial planner is worth a look if you are trying to understand the potential fees and expenses associated with annuities: The author considers the following: Annual contract charges Mortality and expenses charge (M&E Fee) Asset management fees Surrender charge Source: CNBC Full Story
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Variable Annuities are Starting to Lose Appeal

Variable annuity sales had been surging prior to the onset of the financial crisis. As reported earlier , many customers who had purchased variable annuities with guaranteed living benefits (GLBs) two or more years ago have been well insulated from the financial storm. However, the current environment for variable annuities and living benefits is vastly different than it was even a year ago. Insurers are now increasing prices and scaling back on the richness of product features, making it a...

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