How important is a Variable Annuitys Insurance Company Rating
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Financial Planning - Financial planning in general. (Moderated) 

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Subject Author Date
How important is a Variable Annuitys Insurance Company Rating pal123 08-09-2007
Posted by Mark Freeland on August 13, 2007, 3:28 pm
> Most importantly, did you FULLY read the fine print on the Jefferson
> National products? From the "monument advisor" page of their website:
>
> * Jefferson National's Monument Advisor has a $20 flat insurance fee
> on more than 97% of our underlying funds.

That's $20/month, and it beats the heck out of the typical 1.4% annual
annuity fee, or even something as low as Fidelity's 0.25% once one gets over
$100K. (1.4% figure is Morningstar/VARDS, quoted at:
http://personal.fidelity.com/products/annuities/content/taxdef_retirement.shtml.cvsr)

> Certain funds also have a
> transaction fee ranging from $19.99 to $49.99 per transaction,
> depending on the number of transactions per year.

Yup. A whole 3% of the 165 funds offered. To avoid the transaction fee,
simply avoid those 3%. They are just the 5 index funds from Nationwide
Life.
http://www.jeffnat.com/articles/MAFundGuide.pdf (any fund tagged with fn
28 - this info is repeated in prospectus)

It doesn't matter what the range of fund expenses is, or even what the
annuity charge is - what matters is which funds within each annuity you are,
or intend to, use. That is, look at your real total cost, and not piece
parts that may not matter in isolation. This annuity has, e.g. a CLS
balanced fund charging a whopping 1.64%, but it also has American Century
Balanced at 0.90%, a Federated hybrid at 1.10%, and Janus Aspen Balanced at
0.58%. Does the 1.64% fund really matter, given all the alternatives?

With respect to the OP's original question - how concerned should one be
with the lower rating of the insurance company: I think that in principle
the OP is right - the assets are in the funds, and are not general assets of
the insurance company. But I don't know how far this principle goes.
Someone still holds the shares of those funds. "The assets of the Separate
Accounts are held in [Jefferson National Life's] name on behalf of the
Separate Account and legally belong to [Jefferson Nat]. However, those
assets that underlie the Contract are not chargeable with liabilities
arising out of any other business [Jefferson Nat] may conduct." Prospectus
p. 25 (pdf p. 27).

What happens if the insurance company absconds with the assets (e.g. uses it
to pay off liabilities)? If a broker does this, you're covered by SIPC and
supplementary insurance. What happens with annuities? I don't know the
answer to these questions. I suspect the risk is very small, but I don't
see separate accounts as providing absolute protection.

Mark Freeland
BnetOnewsX@sbcglobal.net


Posted by kastnna on August 13, 2007, 4:54 pm
> > Certain funds also have a
> > transaction fee ranging from $19.99 to $49.99 per transaction,
> > depending on the number of transactions per year.
>
> Yup. A whole 3% of the 165 funds offered. To avoid the transaction fee,
> simply avoid those 3%. They are just the 5 index funds from Nationwide
> Life.http://www.jeffnat.com/articles/MAFundGuide.pdf(any fund tagged with fn
> 28 - this info is repeated in prospectus)

So be it. I used quotations because I took that statement directly
from JeffNat's website. I have never dealt with this company nor have
I read the prospectus. This may be a great annuity. I simply suggested
that he fully research the details before jumping in. I don't think
that's ever a bad idea.


Following the link you provided
#28 - states the "the performance numbers shown do not reflect the
deduction of any transaction fees. If deducted the performance shown
would be lower." Well there you go.


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