An annuity contract's maturity date or annuity date is the most misunderstood contract provision.
Originally posted by Gary Spicuzza on December 6, 2006
Here’s what attorneys claim:
“Agents seek out the elderly, because in most cases the annuity's maturity date is beyond the buyer's actuarial life expectancy.”
Here’s what stock brokers and bankers claim:
"You have to lock up your money for longer than you’re supposed to live."
Here's what news media claims:
"Trish Regan, (CBS news), reports on how some retirees are being tricked into buying long-term annuities that won't pay off until long after they're dead.”
The above statements are absolutely FALSE.
The Flexible Premium Deferred Fixed Annuity I sold my 78 year old mother in 1999 had an “Annuity Date” of December 2, 2014. That’s right, 15 years in the future! She would have been 93 years old before the contract would mature.
Can you believe I did that to my own mother?
What attorneys, stock brokers, bankers and news media would lead you to believe is that my mother had no access to her money until that date and will more than likely be dead before the policy ever matures.
These are absolute twisted material misrepresentations.
Because an annuity contract is a CONTRACT, the contract has to state some date in the future for the owner to elect an annuity settlement OPTION to begin receiving payments by way of annuitizing the contract.
All that happens on the Annuity Date or Maturity Date is the client will receive a letter from the company advising them of their settlement options.
My mother did in fact pass away four years later on January 20, 2004. She enjoyed the higher monthly interest earnings she received every month from her annuity. The extra monthly interest income supplemented her Social Security while NOT diminishing her principal or risking her money in stocks or mutual Funds. She averaged 5.7% interest per year on her funds in her annuity and when she passed away the principal was paid DIRECTLY to the named beneficiaries within days of the company receiving the claim form.
So what’s my point?
The “Annuity Date and/or “Maturity Date” printed on the Policy Data Page is meaningless for all intents and purposes.
It does not mean that is the date you have to wait to have access to your funds. Nor does it mean that is the date you have to wait to begin annuity payments. Most all contracts allow the owner to change the Annuity Date and most companies will allow a client to annuitize the contract anytime after the first contract year.
Nearly all annuities have a liquidity provisions written in the contract. Most allow a 10% free withdrawal per year during the surrender charge period. The surrender charge period typically lasts anywhere from five to ten years depending on the company and contract. A client can, at any time, surrender their policy. Though doing so in the surrender charge period would result in a penalty. After the surrender charge period a client can completely surrender the policy without a penalty. Again, these facts make the annuity date or maturity date meaningless.
I hope this clears any confusion for you regarding the annuity date. If you have your own specific questions regarding your annuity policy, please don't hesitate to contact us. We would be happy to help.
James Spicuzza is an estate and retirement income planner serving Palm Harbor, Florida since 2006. If you have any questions, James may be reached at 727.939.9465 or by e-mail. Learn more about James Spicuzza.