More Controversy surrounding Living Benefit Variable Annuities

It seems that I need to give you more objective information about annuities after I received an email from a trusted reader of my blog. I may end up with egg on my face over this but I am no expert on this and if new information comes to light I need to get it out there for you to judge for yourselves.

He expressed two concerns with Living Benefit Variable Annuities and these are;

  • With the “Guarantees” the insurance companies do not fully disclose how much money they are holding back as reserves for these guarantees. He has no proof this is the case but believes it might be the case.
  • He doesn’t agree with John Huggard’s description that Annuities are a cheap or inexpensive insurance.

He goes on to say that he agrees that at this time Living Benefit Variable Annuities are offering some unbelievable guarantees because it is so competitive right now. But maybe these insurance companies might overstretch themselves to get market share and then not be able to deliver when you need them to (my words).

He cautions that as with all things that look too good to be true, they may well be just that. So you need to be very cautious and thoroughly check out any living benefit variable annuity you are considering.

I decided to do some more research on John P Huggard and found a couple of references that dispute Mr Huggard’s statements about LBVA’s. So then I tried to locate an email address so I could ask Mr Huggard about the concerns expressed by my friend and by the article writers. But I have not been able to find an email address yet.

I also need to correct what might be misinformation. I mentioned in my post, “Guaranteed Income For Life for Baby Boomers” that John P Huggard is definitely not an insurance salesman. However he is a Partner in the Law Firm, Huggard, Obiol & Blake, P.L.L.C. They specialize in Estate Planning and Probate amongst other things.

Professor William Reichenstein wrote a document entitled “Critique of Huggard’s Analysis in March 1999 Issue of Financial Planning“. It was published in February 2001 and had some minor editing on July 2002. This document claims there are some serious flaws in John P Huggard’s arguments.

I strongly urge you to read the document if you are contemplating investing in LBVA’s. Please note though that the latest version of Huggard’s Book is 2008 and it may well be that flaws have been corrected and the annuity products may be dramatically different from those around in 2001-2002. It is in your interest to find out.

A recent article by Scott Burns is also critical of Variable Annuities. You can read his article here “Variable annuities big despite drawbacks“.

I do believe my friend has a valid point with his “It may be too good to be true” advice. But I still think Life Benefit Variable Annuities should be thoroughly investigated to see if they will benefit you in your situation.

As with all things to do with a Baby Boomer Nest Egg you need to consider the risk and make sure you understand it before investing in any product. Living Benefit Variable Annuities are just another investment option to consider.

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