The Investment Scientist

Posts Tagged ‘variable annuity

Conflict of Interest

Goldman Sachs, Rating Agencies Blamed in Senate Crisis Probe by CNBC

Where to Find Financial Advice? Probably Not Your Brokerage Firm by Oblivious Investor

Asset Protection

Protecting 401(k)s, IRAs From Creditors by


10 Ways to Beat the Market by Nathan Hale of Money Watch

Variable Annuities Don’t Belong in Retirement Plans by Mel Lindauer of

5 Sexiest Things about Indexing by Allan Roth of Money Watch

Value of Full-Service Brokers? By CXO Advisory

What’s My Job? By DIY Investor.

Listen to an insurance agent's financial advice

Invest in a Variable Annuity

Recently, a client of mine brought me the variable annuity he bought a few years ago.

Prominently displayed on the first page are the benefits of the annuity:

Death Benefit: Enhanced Guaranteed Minimum Death Benefit

Living Benefit: Lincoln Lifetime Income Advantage

as well as the fact that the money will earn an fixed annualized rate of 5.75%. Under the bold ACCOUNT FEE subtitle, it states: Account fee is $35 per contract year.

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Annuity without Risk

Annuity without Risk

Recently, I was approached by a prospective client named John, who has all of his retirement in one annuity.

I have always been intrigued by how annuities and life insurance are sold. Listening to John explain his decision-making process and reading through the annuity contract is like turning on the light bulb in my head.

It turns out that the unique selling point of this product is the “200% Step-Up of the Guarantee Amount (GA).” The way John puts in, if he just keeps the annuity for 10 years, he will get back 200% of what he put in. What is there not to like about that! After all, he gets guaranteed upside with absolutely no downside risk.

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Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC.


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