From the March 2009 issue of Boomer Market Advisor • Subscribe!

Buyer's remorse - Boomers fret over VA contracts

For years, variable annuities got a bad rap: too-high fees for benefits consumers would never use. Why pay an insurance company for minimum-return guarantees, critics asked, when stocks in the long run always rise? So writes Leslie Scism recently in the Wall Street Journal.

"Yet baby boomers kept on buying these retirement-savings products - and many now worry they got too good a deal. With the broad U.S. market down more than 40 percent from its peak, their concern: Will the insurers be able to make good on all of the promises?"

More than 22 million variable-annuity contracts are currently in force, she notes, totaling $1.4 trillion in assets, and the majority includes some type of guarantee. If owners haven't done so lately, this is a smart time to review their contracts and consider available options.

"In a competitive frenzy leading up to the market's October 2007 peak, life insurers layered on increasingly generous promises. Some commit to paying out the investment gains that existed in customers' fund accounts just before the market slid, and some promise minimum annual increases in account value of 7 percent for years to come."

According to Scism, customers in droves are calling their financial advisors to ask about insurers' health. Those advisors, in turn, are calling the insurers, asking them to explain their financial-hedging strategies.

For boomer advisors and broker/dealers alike - if they haven't already done so - it's probably a good time to review the percentage of their VA book currently "in the money" and the risks associated with it.

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