Do you know why 91% of all variable annuities are sold with a guaranteed income benefit, and/ or the new and improved version that even comes with a sexy “step-up feature” (we are not talking about taxes by the way). It’s because registered reps,and their broker dealers, are afraid to sell them without the rider. Honestly, it’s about liability, the reps are afraid to charge all these fees, and have their clients lose their money, so they put these riders on to insure that at least the clients, over 20 years, will at least get their principal back, less any withdrawals. But the cost of the riders only add to the negative compounding effect, and their liability. These companys and salespeople have no “cumulative perspective” in regard to variable annuities.

People are baffled, but so tooo are the registered reps selling these, and they should stop now and cut everyones losses. I liken the purchase of a VA (with expensive riders that do nothing more than return your money to you over time, and charge you for it), to trying to swim a mile with ankle weights. Eventually you are going down. Steer clear and do more research. Consider safety, consider moderation, but do not by use VAs with expensive riders.

Pretend you put $100,000 (it would worse if you put in $200,000), into a variable annuity with a GMWB (a guaranteed minimum withdrawal benefit), all toll, charges for mannagemment and expenses will be between 1.25 & 1.75, lets say 1.5%. The average sub account (mutual fund) will cost you approximately 1%, (some a little more, some less). And the GMWB rider cost will be .45% to .75%. ,to make sure you recieve 5% of your original principal over time, once you begin withdrawals. All toll, let’s say 3%.

Magicians should not give away the secrets of their tricks, but 20 x ? = 100% OF YOUR OWN MONEY. Magically 5% works(all people get back is their own money).

If you withdrawal 5%, and the costs for this “financial vehicle” are 3%, your $100,000 is now adown to %92,000. In oderer to still have 100,000, after withdrawals, you would need a net return the next year of approximately 9%, so you would need the underlying securities to return 12% the next year if you add the constant 3% overall cost of the average variable annnuity, (not including indisclosed costs), just in order to get back to $100,000.

Now, consider a 10% loss in the underlying securuities, plus your 5% withdrawl, plus 3% in variable annuity costs, and you are now sitting at $82,000, when all is said and done. So how much do you need, in terms of a positive return the next year, just to get back to your original $100,000? The answer, you would need a 22% just to get back to $100,000. Think about all of this, the next time someone, or some company 9via advertising),says you have the chance to do even better with their step-up benefit, for just a small charge. You are not going to get back to that step -100%, and if you do, your very lucky, but even then, you probably won’t get far above the $100,000. if you get to $110,000, your withdrawl will go to $5,500, a year.

Information, Ben Stein (even though he is brilliant), financial advisors, and connsummers, should think about. For more infornmation, conservative/moderate savers and investors can visit AmericanAnnuityAdvocates.com

When it was on, I absolutely loved Win Ben Stein’s Money. Over at My Retirement Blog, the anonymous blogger reports that Ben’s an advocate of variable annuities (tax advantaged savings vehicles with investment components). Who knew?!…