Variable Annuity(s) as sold by insurance sales folks. Real time knowledge of fees,recurring fees.

Comments

• yogibearbull

  July 12 edited July 12

  You may know that VAs are covered by MFO Premium and the new TestFol (Morningstar used to cover them too, but now that is now part of M* professional products). My particular focus has been on TIAA VAs, but others are covered too (including from Fido).
  MFO Pointers https://ybbpersonalfinance.proboards.com/thread/539/mfo-premium
  TestFol Pointers https://ybbpersonalfinance.proboards.com/thread/626/testfol-io-free-portfolio-analytics
• msf

  July 12

  The TIAA VAs that yogi is writing about are the CREF annuities. TIAA invented variable annuities for the predecessor of 403(b) plans back in 1952. These qualified annuities are different from the non-qualified annuities that Catch is asking about.
  
  Non-qualified annuities are funded with after tax dollars. From an IRS perspective they are similar to non-deductible T-IRAs. Like IRAs, they have a penalty if you take withdrawals before age 59½. One difference is that unless you annuitize, the non-deductible dollars are the last ones out, unlike non-deductible T-IRAs, where withdrawals are prorated between pre- and post-tax dollars.
  
  If one disregards typically expensive optional bells and whistles (enhanced death benefits, GLWBs, etc.), VAs can be used as non-deductible T-IRAs after maxing out one's IRA contributions. Unlike T-IRAs, they do not have RMDs at age 73 or so; however they do require one to withdraw money or annuitize at an age specified in the contract (usually somewhere between 85 and 90 or 95).
  
  VAs all carry a variety of charges. Each contract sets its own rates, just as each mutual fund sets its own fees. Morgan Stanley (see link below) does a good job of giving industry ranges. Read the paper if you care to know what these fees are for:
  
  Mortality and Expense Risk (M&E): 0.20% - 1.80%
  Administrative and Distribution Fees: 0.00% - 0.60%
  Annual Fee: $30 - $50, waived with high enough balance (typically $50K)
  Contingent Deferred Sales Chage (CDSC) - think "class B shares" - 0% to 9% declining
  
  https://www.morganstanley.com/content/dam/msdotcom/en/assets/pdfs/wealth-management-disclosures/understandingvariableannuities.pdf
  
  As you can see from these ranges, there are some VAs with low "wrapper" fees (the first three charges), and that don't charge a fee to get out (no CDSC). The Fidelity Personal Retirement Annuity mentioned by catch (0.25% wrapper fees) is one such annuity. Until 2019 Vanguard had its own VA. At the time I believe its wrapper fee was 0.30%. There are others.
  
  Of note, especially since yogi mentioned TIAA, is TIAA Intelligent Variable Annuity. Its fees depend on the size of the annuity, ranging from 0.50% (plus $25 if under $25K) to 0.35% (at $100K) and 0.25% (at $500K). The kicker is that after ten years, the wrapper fee drops to 0.10% regardless of balance. See prospectus.
  
  Schwab sells a low cost VA (Genesis Life from Protective Life) with a 0.45% wrapper fee. There are a few others (I recall Pacific Life being one); search for no-load variable annuities.
  
  As with 401(k)s, one also needs to consider the costs of the underlying portfolios. Like mutual funds, these come in multiple share classes. So it's not enough to simply look at the VA portfolio fund, but its share class. For example, both Fidelity and TIAA sell Pimco VIT Commodity Real Return Strategy. But Fidelity sells the Administrative class shares (see the prospectus it links to) with 1.48% ER after waivers, while TIAA sells the institutional class shares with an ER of 1.33% (see its fund prospectus).
  
  Last and probably least are a couple of comments about M*'s coverage of VAs. When comparing star ratings (if you can find them) M* has two different sets of ratings. One is for the fund itself (could vary by share class), the other is for the fund within the VA, i.e. including the wrapper fees. Most funds will tend to get high star ratings in the low cost VAs simply because they cost about 3/4% less than in "average" VAs. All those 4 and 5 star ratings are relatively meaningless if what you're interested in is the risk-adjusted performance of the underlying funds.
  
  Second is that one can still eke out some VA info from M*. One has to search for a hidden "ticker" symbol of the fund of interest. That ain't easy. For example, here's the google search I did for dfa VA international value portfolio. It turned up a FT page with a ticker-like value of 0P00003CY8. In M*'s portfolio manager, create a portfolio with this as the sole holding, you'll be able to get a little info, including its YTD gain of 9.48%. And if you have premium membership, you'll be able to x-ray that portfolio to find that it is 98% foreign, with 54% in LCV.
  
  If you add "pdf" to the search string, you might even turn up a 2 page M* report on the portfolio, such as this one at Pacific Life. (Just check the date to make sure you found a current report.)
  
  
• yogibearbull

  July 12

  @msf is correct, there are TIAA VAs as well as CREF VAs.
  
  The VAs don't trade and there are no standard tickers for VAs. But referring to them by some tickers is convenient. Unfortunately, Lipper has its own tickers, MFO Premium has its own (slightly modified Lipper’s), and Nasdaq has the 6-digit Q-tickers.
  
  A recent development at MFO Premium was that Q-tickers for CREF VAs and TIAA Real Estate VA QREARX are now recognized. TestFol also recognizes Q-tickers.
  
  @catch22, if tickers aren’t known, then providing full name of the VA and its sponsor may be helpful in search.
  
• catch22

  July 12

  @yogibearbull Thank you and to @msf for the input to this post.
  
  Fidelity's VA. If you're curious, these are the FIDO VA investment choices (65). They provide return/ER information in general with this list and you may click the ticker for a bit more information. I think this is a decent presentation for the VA.