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Virtus Wealth Management is the product of a 2016 merger between two well-established Texas wealth management firms.

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Wealth management is more than just investment advice – it includes all aspects of a client’s financial life.

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Wealth management is more than just investment advice – it includes all aspects of a client’s financial life.

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At Virtus Wealth Management, we believe we can help you no matter what age you are, what life stage you are in, or how much money you are working with. We want you to feel educated, empowered, and involved in the planning of your financial future.

Why Annuities May Be Worth the Cost

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  • Why Annuities May Be Worth the Cost

by | May 20, 2021

Annuities are often perceived to be expensive in relation to other retirement savings and investment products. However, when the benefits of an annuity are weighed against the costs, the value becomes clear. They can play a valuable role for people who are approaching retirement and concerned about having sufficient retirement income. Annuities are protected from creditors in Texas by state statute. As well, deferred annuities grow tax deferred until withdrawals.

It’s true that the costs associated with most annuities can seem expensive, especially when compared with the costs of other investment products. But market ups and downs, the current low yields, and interest rates can make generating a source of guaranteed income challenging with many of those savings and investment vehicles.

By contrast, the principal benefit of many annuities is to provide a guaranteed income payment during retirement, either for life or for a special period. The portfolio durability associated with this type of guarantee can offer clients a degree of comfort they otherwise might not enjoy without an annuity.

Take a look at the charges that are commonly associated with annuities and let’s see what they pay for. Generally, there are four main categories: insurance, surrender, management and rider.

  • Insurance charges also known as (i) administrative charges and (ii) mortality and expense (M&E) charges, cover the cost to the insurance company of (a) the guarantees included in the annuity and (b) selling, setting up and maintaining the contract. These charges are standard for most annuities.
  • Surrender charges may be incurred when someone withdrawals sums in the early years of the contract. Charges are assessed as either a percentage of the amount withdrawn or the account value. Often there is an annual free withdrawal amount (e.g. 10%) set in their contract. However, surrender charges do not incur if the client holds the contract for the duration of the surrender period.
  • Withdrawal charges are applied if money is withdrawn prior to 59 ½ years of age, typically with a 10% withdrawal fee.
  • Portfolio Management charges apply to variable annuities and are deductions from the assets of each underlying investment portfolio to cover the costs of the portfolio management.
  • Rider charges apply to the optional living or death benefits that are available for an extra charge in your annuity. Living or death benefit riders can be used to provide a guaranteed level of withdrawal or income benefit or to provide additional death benefits. These charges only apply if you opt for additional benefits.

Generating an income through other products that are exposed to the market may be difficult, but annuities can bring durability to your portfolio. By offering an income for a specific period or for the rest of you life, annuities can be one of the most cost-effective solutions to retirement planning. My firm can help you understand the value and associated costs annuities could add to your particular retirement plan so that you can determine with confidence whether buying annuities would be right for you.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Annuity guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 are subject to 10% IRS penalty tax.


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