Five Myths about Indexed Annuities: Part 3

By Jim Poolman

Myth: Indexed annuities impose uncharacteristically high surrender fees

Truth: Surrender charges, which limit liquidity to an extent, are clearly disclosed, decline over time, and provide a known cost of exit. An annuity owner has no reason to be concerned with the penalty on their annuity, unless they plan on withdrawing money during the surrender charge period. Even then, the annuity owner has the freedom of taking out 10% every year without penalty. Some indexed annuities even allow as much as 50% of the annuity’s value to be withdrawn in a single year.

Annuities also offer many liquidity features not available in investment products. For example, 9 out of 10 indexed annuities provide a waiver of the surrender charges, should the annuitant need access to their money in events such as nursing home confinement, terminal illness, disability, and even unemployment.

Watch for tomorrow’s post about sales agents and commissions.

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