Jane's Surprise

The Importance of Understanding Variable Annuity Fees

The Situation: 47 year-old pediatrician Jane Smithline plans to retire at age 65, then start a clinic for underprivileged children. After consulting with her financial advisor several years back, she decided that a variable annuity, with higher contribution limits than a 401(k) or IRA, would be a good fit for her initial $250,000 investment.

The Challenge: While Jane understands that investing in a tax-deferred account can extend the value of her savings—maximizing the amount of income she'll have when she retires—she didn't pay close attention to the fees associated with the variable annuity she bought. Reviewing her statement one day, she noticed that performance of the annuity was consumed by some fees whose benefits weren't quite clear. When Jane looked more closely at the details of her account, she realized she was paying a 1.35% M&E charge (the industry average according to Morningstar (as of 12/07)), and that the GMIB (Guaranteed Minimum Income Benefit) rider she had been sold was costing so much (0.50%) that it hardly provided a benefit any more. At a combined cost of 1.88% annually, these fees were eating her annuity alive.

The Result: Not wanting to have a significant portion of her retirement savings completely eroded by high fees, Jane decided to suffer the surrender fees, and exchange her old variable annuity¹ for a flat insurance-fee variable annuity—with no hidden charges.²

JANE'S FIRST-YEAR FEE SAVINGS ON $250,000

As a result, Jane enjoyed M&E fee savings of more than $4,000 in the first year alone. She was then able to make up the difference on that relatively hefty surrender penalty over time.

The bottom line: Jane learned that not all variable annuities are equal. Before investing in any variable annuity, it pays to know exactly what fees you'll be charged, and what benefits you may lose. By investing in a flat insurance-fee variable annuity, Jane's retirement savings can now truly benefit from the tax-free reinvestment of earnings. What's more, Jane could fall to a lower tax-bracket when she retires, which could further maximize her retirement income...This means she could be paying less taxes on those distributions as income in her retirement years than she would have been paying on them as earnings and/or dividends in her accumulation phase.

Though she was first drawn to her former variable annuity because of the relative comfort provided by the Guaranteed Minimum Income Benefit, she was willing to sacrifice that product feature to maximize her savings during this, her accumulation phase. Monument Advisor offers no comparable benefit, and therefore charges no comparable fee. Jane had to take a long, hard look at Monument Advisor...A product built without many of the traditional riders and insurance components that can make some variable annuities very pricey. As always, one should carefully consider what benefits they may lose when moving their money from one annuity to another...They can be vastly different.

Now it's your turn:

Compare an investment in a flat insurance-fee variable annuity versus any other variable annuity on the market today. You'll be amazed at what a difference a flat insurance fee can make to your spendable assets in retirement.

To speak to a Jeffnat representative call
(866) 949-3528 or request information.

Spread the Word

COVESTOR

BOOMj

E-MAIL THIS TO A FRIEND

Privacy Request Information Prospectus Site Map

¹Before switching to Monument Advisor, please review the policy and prospectus to identify any penalties, surrender charges or loss of benefits that may pertain to your existing variable annuity contract. Monument Advisor does not provide enhanced living benefits, or withdrawal benefits. Until distributed, the Death Benefit amount in the investment portfolios is subject to investment risk. Please consult with a tax advisor for any potential tax consequences for switching from one variable annuity to another. Please note this is not an endorsement to switch from your current annuity to the Monument Advisor variable annuity. You should review your particular situation to determine which variable annuity is appropriate for your needs.

²Jefferson National's Monument Advisor has a $20 flat insurance fee on more than 97% of our underlying funds. Certain funds also have a transaction fee ranging from $19.99 to $49.99 per transaction, depending on the number of transactions per year. See the prospectus for details. Like other variable annuities, the customer pays fees of the underlying funds selected plus the fees of any advisor hired.

An investor should carefully consider the investment objectives, risks, charges and expenses of the investment before investing or sending money. For a prospectus containing this and additional information, please contact your financial professional. Read it carefully before investing. The summary of product features is not intended to be all-inclusive. Restrictions may apply. The contracts have exclusions and limitations, and may not be available in all states or at all times.

Variable annuities are investments subject to market fluctuation and risk, including possible loss of principal. Your units, when you make a withdrawal or surrender, may be worth more or less than your original investment.

Variable annuities are long-term investments to help you meet retirement and other long-range goals. Withdrawal of tax-deferred accumulations are subject to ordinary income tax. Withdrawals made prior to age 59 ½ may incur a 10% IRS tax penalty. Jefferson National does not offer tax advice. Annuities are not deposits or obligations of, or guaranteed by any bank, nor are they FDIC insured.

Monument Advisor is issued by Jefferson National Life Insurance Company (Dallas, TX) and distributed by Jefferson National Securities Corporation, FINRA member. Policy series JNL-2300-1, JNL-2300-2.