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Variable Annuities: Do I Have to Die to Get My Money Back?

Jul 25, 2008
Would you like your money back when you are dead? Well, that seems to be the question when it comes to variable annuities. Here is the reason.

As you may be aware, variable annuities are constantly being criticized. One particular reason is that they happen to typically be expensive. The expenses in a typical variable annuity can be as high as 4%. This usually means that if the market averages 9% over a specific time period, you may average way less because of the fees.

That's not the only variable annuity drawback. There are also issues of taxation. Yes, they are tax deferred but are they accumulating taxes unnecessarily? Well, that may be the case. I always mention this but capital gains taxes are so low right not that it almost makes sense to pay them as opposed to a tax deferred 'income tax' even though your money is being compounded.

So where does the notion of getting your money back when you die come in? Well, let me explain. One typical benefit of a variable annuity (please check your specific annuity for EXACT details), is that the amount of principal you invest becomes your MINIMUM death benefit. So if you lose principal due to stock market conditions, your initial investment will still be your death benefit. One note, however, is that some insurance companies have changed that to only be true if you invest in a manner that is considered appropriate (not too risky).

With that said, some often state that a variable annuity is the annuity where you can only get your money back if you die!!! Well, it certainly feels like that when we are in a market that won't seem to turn positive. So, yes, you may only get your money back when you die. Is that how you want it?

Well, it's one way to look at things. Variable annuities can be tricky. It's important to understand that they are not always what they appear to be at face value. As great as they may appear to be, it may be worth taking a more in depth look unless you only want your money back when you die.

Some of the more not so obvious things about the variable annuities are the so called guarantees that they come with. These guarantees on the surface look great but a more in depth look at them typically reveals something that is not so great. It's just worth mentioning this because there are things you absolutely must know before you get involved with a variable annuity and it's very important to do your homework.
About the Author
To learn more about the drawbacks of variable annuities, or to view videos educational videos regarding annuities, please visit the The Annuity Video Blog.

Tony Bahu is author of the controversial book, 'Annuities: The Shocking Truths Revealed.'
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