I am learning a lesson the hard way. I was naive and trusted a financial advisor to invest my/wife's retirement accounts ($240,000 total 2/3 in Roth) in this Equitable product called a Registered Index-Linked Annuity (RILA). It's comprised of a mix of buffered ETFs. We're both in our mid-30s.
There are no "explicit fees," but there are essentially caps of 10-12% where any growth beyond that goes to Equitable, not me. ALSO, all dividends go to Equitable. I am unclear on how to ascertain just how much dividend return I am losing out on, but other Reddit posts suggest ~1.5%.
I am seeing the light 2 years later, and here's where I'd value your input: The surrender charge is 6% right now – it decreases to 0 in 2030 (4 more years).
Does four more years of losing out on dividends and being stuck with capped growth outweigh paying a one-time 6% surrender fee right now, to get it out of this awful product?
Thank you for any/all input.
What's the best way to get OUT of this BAD investment?
byu/GravityGrape2296 inpersonalfinance
Posted by GravityGrape2296
9 Comments
I’d happily pay a 6% surrender charge on something that limits my growth for the next *four* years.
What about when they lose money?
As you now know, you didn’t talk with a financial advisor, you spoke to an insurance agent.
oof. since there is no legal recourse, i’d pay the ransom to regain control of my own assets, and also put them on blast as predatory.
you do not understand what you own. you are disregarding the downside protection with the stock market at or near all time highs and a war in the Middle East. yes, you are capped on the upside but protected on the downside. You have transferred a portion of your risk to the insurance company and for that you pay a fee.
This product doesn’t sound that terrible the way you’ve described. If you’re capped at -5% and +10%, you’re basically selling calls and buying puts. That put is more expensive than that call on SPY; more than the dividend yield.
Question is really whether the implied expense ratio is greater than 1.5% (= 6% surrender charge / 4 years till it disappears)
ETF-linked annuities like this have a minimum return regardless of how the markets move, but as you’re learning they have a limit on the upside as well. These products can be useful for retirees or near-retirees who want guaranteed return with some possible upside, without risking major drops in the market. It’s popular to ladder them in year or two increments to provide income down the road. They are fee-heavy and expensive to cancel, as you’re learning. At your ages, you should be fully invested in the market in diversified funds with proven returns. You don’t need a financial advisor.
Why did your wife let you do that?
What has your roi been the past 2 years? It doesn’t sound as bad as you are making it out to