Variable Annuity Drawbacks

Video Transcript

"This is financial adviser Patrick Munro talking about variable annuity drawbacks. Like the word implies, variable means up and down. Most people would like their financial future to go up, maybe stay the same for a while in stormy times, but never go down. That is the inherent problem with variable annuities. The other problem is, variable annuities are comprised of mutual funds. Mutual funds of course have fund managers that have to make decisions and sometimes they're the wrong ones for you as a fund holder, and if that happens, the fund will go down. Typically mutual fund managers also have expenses to manage your money. Those expenses come out of your investment before you get any return. There are other fees to variable annuities, such as an M & E charge. M & E stands for mortality and expense charge, as well. It's essentially a fee for dying. Also, you have in addition to the fees of the mutual fund you also have internal rates of returned fees, there's also principal protection riders, where, there if the market was to go down and it ties your money up over an extended period of time. For more information on variable annuities and the risks that are associated with them, go on the web to www.sec.gov, click on enforcement, then click on investor alerts, and you'll see variable annuities, what you should know, and it's a tutorial about variable annuities and some of the risk associated therein. I'm financial adviser Patrick Munro."