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| Annuities: Don't Put Your IRA In A Variable Annuity | |
| If you've talked to a broker or agent about rolling over your retirement account, there's a good chance the advisor recommended you invest in a Variable Annuity. Don't do it! I believe the only reason a variable annuity is recommended for an IRA is so the advisor can earn more money. Let me explain. There's a high probability that if an advisor doesn't recommend an Equity-Indexed Annuity for your IRA rollover, a Variable Annuity will be recommended instead. 'There are so many advantages to a variable annuity versus a mutual fund', you're told. I disagree. It's advantageous for the advisor, not the investor. In this article, I'll debunk the two main arguments used in selling variable annuities. First, that you don't pay a commission and secondly, the importance of the death benefit guarantee. I'll explain how you pay dearly for both. One of the main sales 'hooks' used in selling a variable annuity is that you don't have to pay a commission. That can be very compelling when compared to a mutual fund in which you pay the all the commission up-front. Many advisors will even say that they get compensated by the insurance company, not you. Do you really believe that? Insurance companies are not charitable organizations. If they are paying the broker, they'll recoup those costs from you--the costs are just hidden so you don't think you're paying a commission. The second main argument for using a variable annuity for an IRA is the death benefit (not offered with a mutual fund). "That way you'll never have to worry about your beneficiary getting less than you invested", the thoughtful advisor says. This feature may seem nice, but you end up paying through the nose for it. With all variable annuities there is a Mortality and Risk Expense (M |
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