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Investing/Strategies / Retirement Investing
|Subject: Re: Variable Annuities beware of broken promises||Date: 7/1/2013 10:15 AM|
|Author: Hawkwin||Number: 72526 of 76384|
This thread is a good example of the misinformation and bias (often rightfully so) against anything with the word annuity in it.
Notice no where in this entire thread did anyone attempt to actually learn more about what Hartford is actually doing. I contacted them and asked them for a copy of the letter they sent clients.
What Hartford is doing is not because of underfunding but because clients more often than not are lousy investors (which is likely why they are in an annuity in the first place). VA's are designed protect people from market losses in one form or another. This often leads to people being more aggressive and more lazy in their asset allocation than they should. Hartford, like many VA companies, made the mistake of letting clients with such guarantees invest their money any way they wish, even if it is in something not diversified and very aggressive. This means that when the client losses a ton, Hartford still has to pay those guarantees even though the account has lost 50% of its value (which is the base Hartford gets to charge their annual fees). Hartford is now doing what I assume most companies do today on new contracts, require that such guarantees have some diversification in order to ensure the account has some cash value long enough to pay out the guarantees. Hartford is too late to make this change in my opinion, which is likely why they have such a hard rule on their asset allocation.
Quotes from the letter:
Consistent with our goal of reducing the market volatility risks of our inforce annuity business, we will begin enforcing subaccount investment restrictions on your optional benefit rider. ...your contract value must be invested with a minumum of 40% in fixed investment subaccounts...
The letter goes on to state that the fixed account (basically an account earning money market rates) will also be prohibited under the rider. Again, Hartford was a bonehead for letting clients invest in such with the rider because Hartford charges no fees on the fixed account and of course it only yields money market rates.
Nothing in the letter suggests the guarantee is being impacted, only the underlying subaccounts.
Not defending Hartford here, they clearly screwed up, but people that bought this for the guarantee of income (why else buy it?) will still get such under this change.
I'd still get out of it as soon as I could unless I was very much underwater.
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