Several years ago, I wrote an article headlined “Variable Annuity Living Benefits: What The Fine Print Won’t Tell You.”
At the time, nobody else was writing about the complexities and long-term cumulative costs of the living benefit riders that many advisors attach to VAs, to guarantee clients a lifetime income.
Since then, the complexities and costs have increased as one insurance company after another tries to manage the liabilities of these riders with investment restrictions, or escape them with buy-out offers.
The stock market’s big rally has created a perfect storm for VA living benefit riders, because they often lock in retirement income levels near the top of a market cycle. Unless VA-writing insurance companies are heavily hedged against a market downturn, they are potentially vulnerable.
Now, the mainstream financial media is waking up to these issues, including an insightful article by Ben Mattlin in Financial Advisor.