Existing Variable Annuity Contracts
Before you consider surrendering your existing variable annuity contract or accepting a buyback offer from the insurance company, be sure that you understand what you own. Prior to making an irrevocable decision, take the time to have an independent expert review your contract and provide observations based on your personal situation.
Benefits of Older Contracts
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Unlike many other investments, an annuity is a contract between the investor and the insurance company. Variable annuity programs offered prior to the 2008 financial crisis were designed when interest rates were higher, market volatility was lower, and there was less concern about risk in general. Today’s current low-interest rate environment and recent market volatility have caused insurance companies to think differently about variable annuities and, as a result, the industry has changed dramatically in the last four years. Insurers have drastically scaled back the benefits and features or eliminated them entirely. They have raised the costs, lowered guarantees, and imposed new restrictions. Some companies are trying to further reduce their exposure by offering to buy-back guarantee benefits from clients.
When compared to the alternatives offered today, older variable annuity contracts often have benefits and features that are no longer available. Many investors who own older variable annuity contracts may not fully recognize or appreciate the value. If you own an older contract, you should periodically examine your investment to ensure that you are utilizing the features properly in the current environment.
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Nick Spagnoletti, Jr., CFP® is a Madison resident and a Partner at MACRO Consulting Group, one of New Jersey’s most distinguished wealth management firms, located in Parsippany. To learn about their Annuity Review service, please call 973-998-9845 or visit www.annuityreview.com.
Annuity Review is an offering of MACRO Consulting Group. Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through MACRO Consulting Group, LLC, a registered investment adviser and separate entity from LPL Financial.
Variable annuities are long term, tax-deferred investment vehicles designed for retirement purposes and contain both an investment and insurance component. They have fees and charges, including mortality and expense risk charges, administrative fees, and contract fees. They are sold only by prospectus. Guarantees are based on claims paying ability of issuer. Withdrawals made prior to age 59 ½ are subject to 10% IRS penalty tax and surrender charges may apply. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. The investment returns and principal value of the available sub-account portfolios will fluctuate so that the value of an investor’s unit, when redeemed, may be worth more or less than their original value.
