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Variable Annuity plan – Is there a catch?

By Byron Udell | June 21, 2006

Variable Annuity

Twice in the last 6 months, I’ve been asked to evaluate and comment on a variable annuity currently being offered by AXA Equitable.  The story many consumers are hearing from their sales force is that, regardless whether or not the underlying funds perform well, your “guaranteed” a minimum return of 6% per year.

While this is hardly the whole truth, in defense of the AXA reps that are out there selling this stuff, no one can realistically explain each and every line in a securities prospectus, which can often include dozens of pages of fine print.  That being said, since the 6% guarantee is something that has come up twice in 6 months, the question is, “Can this product deliver a 6% guarantee while at the same time provide the potential upside of better performance if the underlying mutual funds within the product do better than that?”

The short answer is NO.  So, what’s the catch?  How can they say it does, when it doesn’t?


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