Jun
21
2006
Is a guaranteed 6% return per year on an annuity possible?
Author: Byron UdellTwice in the last 6 months, I have been asked to evaluate and comment on a variable annuity currently being offered by AXA Equitable. The story many consumers are hearing from their sales force is that, regardless whether or not the underlying funds perform well, your “guaranteed” a minimum return of 6% per year.
While this is hardly the whole truth, in defense of the AXA reps that are out there selling this stuff, no one can realistically explain each and every line in a securities prospectus, which can often include dozens of pages of fine print. That being said, since the 6% guarantee is something that has come up twice in 6 months, the question is, “Can this product deliver a 6% guarantee while at the same time provide the potential upside of better performance if the underlying mutual funds within the product do better than that?”
The short answer is NO. So, what’s the catch? How can they say it does, when it doesn’t?
More after the jump…
April 4th, 2007 at 10:41 pm
The decision by a company (ANY company, not just AXA) to place “catches” like this into an annuity leads to people painting all annuity products with the same brush. It isn’t necessarily right, of course, but I think it is human nature. The question is… if the sales agents themselves don’t understand the entire thing, what chance in the River Styx does a client have?
Jerry