I love my readers.? How many Variable Annuity [VA] products got mentioned to me as a result of yesterday’s article? Four, out of 2 emails, 3 comments, and one clever guy who figured out my phone number (no, I don’t keep it secret).
- Vanguard’s VA offerings
- Fidelity’s VA offerings
- Symetra’s VA offerings
- Jefferson National’s VA offerings
In my opinion these are some of the better VA options out there.? It’s not quite what I proposed in my article, where every major mutual fund would offer T-shares, but they are close.
My main differences with these products is that:
- the expense charges going from taxable to annuity should be smaller.
- there should be more choices, aside from Jefferson National.
- it would be better if the mutual fund companies took the lead in these matters.
As an aside, I pushed for products like this from 1996-2006.? By the time I gave up, I concluded that there was no one willing to offer variable annuity products that were truly cost-efficient.? Now we have at least four contenders, though I think my product idea would be better still.
But incremental improvement is a good thing.? Thanks to those who commented, emailed, and called.
David,
Read your previous article and now this one. I think your idea would not pass muster as an insurance product. There needs to be some form of guarantee to the the product, otherwise you are just selling tax-deferred mutual fund accounts.
Insurance costs real money — to guarantee a death benefit on a variable account value has to involve some tricky actuarial work — I would like to hear your feedback. Putting a guarantee on the annuity payout benefit adds additional cost.
Too low pricing on variable annuities could put the insurance companies in the same boat they climbed into with disability insurance a few years back. A serious multi-year bear market could put these companies on the hook for significant payouts on account value guarantees.
Dear Tim,
That was something that I wondered about. Thanks for saying that. I could see a product with a limited lookback, like the highest value over the last year, as a death benefit guarantee… maybe that could go for 50 bp/yr. That would qualify, but not be expensive.
That said, if there are annuitization provisions in the VA, doesn’t that cover it? After all, only 0.5% of all fixed annuities get annuitized, and they qualify as insurance products even though they act like savings accounts.
I do not think the any life insurance company would be that progressive if they could get regulator approval. They have enough trouble making money with the current batch of VA products.