The Cost of Flexibility

Average: 3 (1 vote)

The L series variable annuity from Prudential is supposed to provide some flexibility for people who are unsure about their time horizon and goals.

The withdrawal charges are designed to provide some flexibility for people who think things might be changing in the near term.

It is a short surrender schedule that starts at starts at 7 percent during the first couple years, lowers to 6 percent year 3, and then 5 percent year 4.  No surrender charges after that and no up-front sales charges.

Trade-off is insurance charges that are higher than the other 3 variable annuities in the "Premier Retirement" series from Pru.

Not sure why someone would make the trade of higher fees over the life of the contract for a lower surrender charge schedule.

Like the other VAs in this series, the money is sort of there if you really need it.  Withdraw up to 10 percent per year, and full access for terminal illness or disability / nursing home.

Just seems that the likelihood of needing the liquidity in 4 years does not offset the higher long-term charges.

People may think that benefit levels will become more attractive once interest rates increase, but who knows if and when this would happen.

Just hard to make the case for the L series when compared to the other 3 from Prudential unless someone knows they might need to make changes in the very near-term.  If the person knows this, then maybe a variable annuity is not the best decision.