Are Variable Annuities a Good Investment in a High Interest Rate Environment?

Annuities are contracts and vary from company to company about their terms and conditions. As a securities lawyer who has reviewed hundreds of annuity contracts for our clients there are several concerns everyone should be aware of before locking up your money.

The first is the money is truly locked up as it has to “annuitize” for it to work so there can be high cash penalties to withdraw your money early. Not only are their high penalties for taking your money out there can also be ongoing high annual fees which can reach as high as 3-4 annualized.

These congoing fees and costs cut down dramatically your investments returns as compared to a low cost bond fund (example Vanguard .09% or less) or laddering out bonds or purchasing a low cost index fund.

Many investors fail to appreciate that annuities still have risk. Many variable annuities have inferior mutual funds in your annuities sub accounts that do go up and down with the stock market. This surprises and shocks many novice annuity investors who thought they were purchasing something stable with no risk.

Another myth that upsets many annuity investors is that there is no commission since it’s not “paid by the customer” but rather by the annuity company. It doesn’t matter who pays who it’s all coming out of your pocket at the end of the day and can be as high as 7%.

The bottom line is annuities can be difficult to understand and once the investment is made you are stuck with it. This is why it maybe wise to have an experienced annuity securities lawyer consult with you to see what can be done to exit your existing annuity contract so you can free up your capital to grow in more liquid, less costly investments.

For a free consultation call an experienced securities attorney by visiting http://www.securitieslawyer.com or call 888-760-6552.