Below you can read about my personal interaction with a consumer last week who was sold a bonus FIA (Fixed Indexed Annuity) to “pay the taxes” on a Roth conversion. After my call, the client contacted Athene to exercise their 30-day free look to get ALL of their money back!
That’s one client saved from making a huge financial mistake. Hopefully, this newsletter will motivate advisors to STAY AWAY from this sales concept and for others to STOP using it!
14-Page White Paper
Why Bonus Annuities for Roth Conversion Don’t Work!
I was so disgusted with this sales pitch that I wrote a 14-page White Paper detailing specifically why using bonus FIAs to “pay the tax” is a mathematical failure. Click on the following link to download (the paper has been updated since the August of 2025 version):
https://advisorshare.com/bonus-fias-roth-failure
Why Bonus FIAs to “Pay the Tax” on Roth Conversions are a Failure
It’s a sales pitch that is powerful and will help advisors sell millions in FIAs (Fixed Indexed Annuities). It’s also a concept that is mathematically flawed, and the chances clients will have a worse financial outcome (vs. not using it) is nearly 100%.
What is the sales pitch?
Advisor: How’d you like me to find the money to pay your taxes on a Roth conversion?
Client: You mean I don’t have to pay the tax out of my own pocket? Please, tell me more!
Advisor: Great, let me tell you about a big bonus annuity where the insurance company’s bonus on the premium paid is going to pay the taxes for you.
My Interaction with a Consumer Who Bought into This Sales Concept
Last week I got a call from an advisor we work with who said he had a client who was being pitched a bonus FIA to pay the taxes on conversion.
The advisor asked me if I would get on the phone with the client to discuss it. What ended up happening in and after that call is stunning.
I spent the first 30 minutes of the call specifically detailing to the client why bonus FIAs to pay the tax on conversions is an absolute financial failure.
FYI, the product sold to the client was a 14% bonus, 10-year surrender charge.
FYI, the annual S&P 500 pt-to-pt cap on the bonus FIA being pitched = 5.5%
Things the insurance agent did NOT disclose to the client:
1) That the carrier being pitched (Athene) has a history of dumping caps on renewal.
2) That the bonus doesn’t fully vest until the end of the 10th year.
3) That they could buy a “good” FIA with an 9.5% cap with a carrier that doesn’t dump caps.
Why FIAs with bonuses do NOT work? I ran numbers LIVE in a ZOOM call for the client using our OnPointe retirement planning software where I compared returns of an FIA with a bonus and without.
Here are the compounding annual growth rate (CAGR) numbers (going back 10 years):
9.5% cap no bonus = 7.43%
5.5% cap = 4.38%
They were being pitched a $345,000 premium.
What would have been the account values at the end of 10 years for both products?
9.5% cap no bonus = $713,070
5.5% with 14% bonus = $602,593
Difference in total wealth = $110,477
This is why bonus FIAs to “pay the tax” on a conversion is a mathematical loser.
The Client Actually Bought the Bonus FIA
I had no idea until near the end of the call that the client already bought the FIA. The money was just transferred to Athene. I almost fell out of my chair. I felt awful for them!
When I was done with my part of the call, there was a long moment of silence. When the client finally spoke up, he was calm and said, well, it looks like we were duped by the agent (which he was).
Thankfully, the client actually knew about his 30-day free look and told me emphatically that he was going to exercise that option.
The advisor who brought me in for help, told me next day that client already requested their money back (and the advisor is helping him move it back to the IRAs).
Don’t Sell What’s Easy…Sell What’s Best for Clients
Too many agents have already sold their souls to sell this nonsense to clients. Fight the urge to choose greed over what’s best for your clients. The byproduct of selling a mathematically flawed concept to clients is that when they find out, your name will be mud, and you could face lawsuits (I have a law firm ready to take on these cases!).
Just Published on Amazon!
Deconstructing Roth IRA Conversions: Myth vs. Reality
I’ll be doing a newsletter on this soon, but for now, I wanted to let readers know it’s now available on Amazon. We spent over a year on this book, and there is nothing like it in the marketplace today. Click here to view and order the book on Amazon (in print or Kindle)!
