There has been a lot of talk about variable annuity buybacks over the past year. Basically, insurance companies are sending letters to people who own variable annuities offering to buy back their lifetime income guarantees. There is a reason that insurers don’t want these variable annuity contracts out there anymore; they are good for the consumer in most cases. Variable annuity buybacks are one of three things that The Wall Street Journal evaluated in Anne Tergesen’s article “IRAs, Medicare and Annuities: Recent Changes You Need to Know About.”
Hartford Financial will be the latest annuity provider to offer a variable annuity buyback come June. Variable annuities with lifetime income guarantees have increased the risks and expenses for insurance companies over the past decade. Many insurers have already offered buybacks to their customers to help lower their expenses and risks. Insurers are offering consumers a buyout of more than their current account value if they cash in their annuity guarantee. But the guarantees are often based on a higher value of the initial premium paid, so it might be wise to keep your income guarantees. One financial planner interviewed said that there is rarely a variable annuity owner who benefits from accepting this buyback offer. Single people who are not in great health are one of the only candidates who might benefit from such a buyback. Couples, especially when one is in fairly good health, should usually keep their variable annuity guarantee to take advantage of the lifetime income offered. Activating the guarantee often pays 6-7% income. The 6% income guarantees are hard to come by with current interest rates unless you take on a lot of risk.
Each year, you are allowed to withdraw money from an IRA without penalty as long as you put the money back into an IRA within 60 days. This “once-per-year-rollover rule” applies to people under age 59 1/2 who would normally be penalized with taxes and a penalty for taking money out of an IRA too soon. A recent regulation stipulates that you can only use this rollover rule once per year, no matter how many different IRAs you have. People were taking advantage of the exception and taking money out of multiple IRAs during the year and keeping it for 60 days. Another change effects Medicare recipients who have chronic conditions. Those people with conditions that are probably not going to get better are denied coverage for nursing care and therapies such as speech and physical. A recent lawsuit now allows people to have claims that were denied by Medicare reviewed in an appeal process.
These recent lawsuit rulings and federal filings make a difference in the finances of older Americans. IRA rollovers, Medicare appeals, and variable annuity buybacks are three hot topics in the news right now. If you have received a letter from your insurance company offering to buyback your variable annuity guarantee, our experts can help you determine if this is the right step in your financial plan.
Written by Rachel Summit