INTELLIGENT Conversation About VAs

or Register to post new content in the forum

67 RepliesJump to last post

 

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Sep 4, 2008 9:56 pm

When would a person ever use a variable annuity? A lot of people argue it's for conservative investors and the psychology of investment; investor performance vs. investment performance, keeping the investor invested (buy & hold strategy). What's the difference between a 6% income/withdraw for life rider versus a 5% CD? Do the insurance salesmen argue that with a VA there's upside potential? Oh really...upside potential, looks dig into the facts.

 
-Using conservative estimate of fees-
VA M&E fee=1.1%
Fund Fee=1%
Income/Withdraw Rider Fee=.65%
 
That leaves the total at 2.75% correct? WRONG.
The rider fee is actually based off the HIGHEST income base in the product. Here's what I mean:
 
Original Account Value=100k
Original Income Base=100k
 
After years of withdraws, lets say...
 
New Account Value: 50k
Income Base: 200k (double due to ratchets and compounding feature in accumulation)
 
Your rider fee is NOW .65 x 200k = $1300 (which is 2.6% of your account value)
2.6% + 1% (fund fee) + 1.1% (M&E fee) = 4.7% cost in fees ALONE. Where's the upside potential?
 
Some like to argue yeah VAs are expensive, but it allows the client to invest more "aggressively"? Oh really, what if the fees ELIMINATE the upside potential? All it would take is a -15% in the first year to completely destroy the upside potential. After that, there is no chance for your income base to step up and your client is basically stuck with a 6% income stream for the rest of their life.
 
 
Sep 4, 2008 9:57 pm

This is not to say I don't believe in the variable annuity, I just believe there are a lot better options out there for the "conservative" investor. Please discuss and show me something I'm not seeing?

Sep 4, 2008 10:14 pm

First things first. Change your site name.

Sep 4, 2008 10:34 pm

I think Ron thinks Chris Varick is a real name rather than a fictional name from the movie Boiler Room

Sep 5, 2008 6:43 am

Chris, I sell a fair amount of VA's.  I also agree that if someone is looking for immediate income, a VA is not the place for this.  I've made the same argument that the person would be better off in a CD at 5%. (We'll ignore the fact that one can't get 5% in a CD right now.)


By the way, your example is wrong in that if one is taking withdrawals like you are claiming, the income base wouldn't be growing.  The point is still accurate that the cost of the rider as a % of the contract value increases as the contract value decreases which increases the chance of the contract value going to zero.


When one looks at a safe withdrawal rate being typically in the 4% range, but then factor in that the fees of the VA will drop a couple of % from the return without lowering the volatility and then couple this with withdrawals of 6%, it is easy to see how a contract value can end up being $0.  If this happens, the person would have been much better off simply buying a SPIA.


That being said, I love VA's in the right circumstances.  What's the right circumstances?  I use them as an accumulation vehicle for IRA rollovers with conservative clients.    The riders are used to control investor behavior.  With these products, I can get a conservative investor to stay invested aggressively.  I'll give you a simple example:
 
Joe has $500,000 in his IRA.  He wants to retire in 10 years with $1,000,000.  He is conservative and if his investments lost money, he would probably pull out his money.   A VA invested aggressively is the ONLY investment that I know of that gives him a possibility to achieve his goal with no chance of losing money.
 
In short, I like VA's for qualified money that should be invested aggressively, but something about the client makes investing this money aggressively without guarantees a bad idea.
Sep 5, 2008 9:49 am

You're also missing the point on the purpose of that income rider.  Whatever the cost, the guarantee is what people will be buying.  VA's aren't being used these days simply for accumulation.  9 times out of 10 when I use a VA it's just like anon said.  IRA money for the conservative people who either need or just simply want the income guarantees.  These are the people who generally tell me they would be happy making 5% for the rest of their lives, but don't understand that I really need to make them 7-8% in order to keep up with inflation.  

 
Sure, you can argue that you can buy a 5% CD and clip the coupon.  I have one in my system right now.  5.2% for 10 years.  So, what about in year 11?  What about reinvesting that money.  What if the best rate I can find is 4%.  Inflation has been going up by 3% a year, so is the client going to be happy with 4%?  Will he have to change his lifestyle because of what the fed has done to interest rates?  I don't know that I can in good consience tell my client that a 5% CD is the best way to plan for income in retirement. 
 
BTW, it's not just insurance salesmen that using VAs for income planning.  Some of the best and brightest financial planners are using VAs as a portion of the income plan for their clients.  You need to rethink your income strategy, not just focus on the cost. 
Sep 5, 2008 10:48 am
anonymous:

Chris, I sell a fair amount of VA's.  I also agree that if someone is looking for immediate income, a VA is not the place for this.  I've made the same argument that the person would be better off in a CD at 5%. (We'll ignore the fact that one can't get 5% in a CD right now.)


By the way, your example is wrong in that if one is taking withdrawals like you are claiming, the income base wouldn't be growing.  The point is still accurate that the cost of the rider as a % of the contract value increases as the contract value decreases which increases the chance of the contract value going to zero.


When one looks at a safe withdrawal rate being typically in the 4% range, but then factor in that the fees of the VA will drop a couple of % from the return without lowering the volatility and then couple this with withdrawals of 6%, it is easy to see how a contract value can end up being $0.  If this happens, the person would have been much better off simply buying a SPIA.


That being said, I love VA's in the right circumstances.  What's the right circumstances?  I use them as an accumulation vehicle for IRA rollovers with conservative clients.    The riders are used to control investor behavior.  With these products, I can get a conservative investor to stay invested aggressively.  I'll give you a simple example:
 
Joe has $500,000 in his IRA.  He wants to retire in 10 years with $1,000,000.  He is conservative and if his investments lost money, he would probably pull out his money.   A VA invested aggressively is the ONLY investment that I know of that gives him a possibility to achieve his goal with no chance of losing money.
 
In short, I like VA's for qualified money that should be invested aggressively, but something about the client makes investing this money aggressively without guarantees a bad idea.
 
Hi Anonymous,
 
I have read some of your posts and I must admit, you provide some very good knowledge. Same example, Joe has 100k IRA and needs 200k in 10 years for retirement. VA would only provide you 200k (provided we compounded at a 7% using a rider) for your income base value DISBURSED at 5/6% ever year. A CD compounding at 5% for 10 years would provide 162k fully LIQUID. Even with different surrender schedules, I see VAs as a LIFETIME investment product that is not liquid at all. What's the point of surrendering a contract you've been paying EXTRA FEES for if you're NOT going to use the income benefits. That's like financing a car and paying interest when you have no intention on driving it.
Sep 5, 2008 10:54 am
Spaceman Spiff:

You're also missing the point on the purpose of that income rider.  Whatever the cost, the guarantee is what people will be buying.  VA's aren't being used these days simply for accumulation.  9 times out of 10 when I use a VA it's just like anon said.  IRA money for the conservative people who either need or just simply want the income guarantees.  These are the people who generally tell me they would be happy making 5% for the rest of their lives, but don't understand that I really need to make them 7-8% in order to keep up with inflation.  

 
Sure, you can argue that you can buy a 5% CD and clip the coupon.  I have one in my system right now.  5.2% for 10 years.  So, what about in year 11?  What about reinvesting that money.  What if the best rate I can find is 4%.  Inflation has been going up by 3% a year, so is the client going to be happy with 4%?  Will he have to change his lifestyle because of what the fed has done to interest rates?  I don't know that I can in good consience tell my client that a 5% CD is the best way to plan for income in retirement. 
 
BTW, it's not just insurance salesmen that using VAs for income planning.  Some of the best and brightest financial planners are using VAs as a portion of the income plan for their clients.  You need to rethink your income strategy, not just focus on the cost. 









 
7-8% return on investments? MAYBE i'll give you that. Going to prior example, it depends when you open the annuity and what kind of market you land on. (Please refer to my previous post and fees)
 
The way I see it is that the guarantee of the insurance companies don't mean much. They can talk about their sharpe ratios and their hedging strategies all day long. If everyone's mutual fund crashes AND the CDs ever go below 3%, chances are our economy isn't looking too great. At that point, how many insurance companies do you think are left in the country? Going back to the liquidity issue, example: John Smith is 50 years old and needs an investment to guarantee income for the rest of his life. Assuming he lives till he's 85, how many emergencies do you think he will have that would trigger lump sum withdraws during the next 35 years? Everyone on this board is probably around that age, so let me ask you guys this, how many emergencies have YOU had during your lifetime? College tuition, surgery, medical reasons, children, etc.
 
This is not to say I don't believe CDs are the perfect income solution, but it's just to say I think it's a better route for these ultra conservative clients.
Sep 5, 2008 11:31 am
anonymous:

Chris, I sell a fair amount of VA's.  I also agree that if someone is looking for immediate income, a VA is not the place for this.  I've made the same argument that the person would be better off in a CD at 5%. (We'll ignore the fact that one can't get 5% in a CD right now.)


I don't fact check you very much as you are usually right on target, but you can absolutely get 5% and more on CDs right now.  I see over 5% in as little as five-year maturities.
Sep 5, 2008 1:38 pm

I don't understand why the guy titled this "Intelligent" conversation...if you have your mind made up, apparently there is no changing your mind.


Bottom line:  a CD or other fixed income instrument gives you the coupon as the absolute BEST case scenario, while a VA invested in equity subaccounts gives a CD/bond like return as the WORST case scenario.
 
It is NOT like having a car loan and not driving the car...it is like "throwing away" money on homeowner's insurance because your house probably won't burn down.  And your lump sum example presumes you put all of someone's $ in a VA and it has a 35 yr surrender period....anyone with half a brain in our business doesn't use one vehicle and treat it like the perfect solution (so doesn't allocate 100% to it).
 
The good news it that it is easy to compete against people like ChrisV when talking to a client or prospect.
Sep 5, 2008 3:17 pm
ChrisVarick:
Spaceman Spiff:

You're also missing the point on the purpose of that income rider.  Whatever the cost, the guarantee is what people will be buying.  VA's aren't being used these days simply for accumulation.  9 times out of 10 when I use a VA it's just like anon said.  IRA money for the conservative people who either need or just simply want the income guarantees.  These are the people who generally tell me they would be happy making 5% for the rest of their lives, but don't understand that I really need to make them 7-8% in order to keep up with inflation.  

 
Sure, you can argue that you can buy a 5% CD and clip the coupon.  I have one in my system right now.  5.2% for 10 years.  So, what about in year 11?  What about reinvesting that money.  What if the best rate I can find is 4%.  Inflation has been going up by 3% a year, so is the client going to be happy with 4%?  Will he have to change his lifestyle because of what the fed has done to interest rates?  I don't know that I can in good consience tell my client that a 5% CD is the best way to plan for income in retirement. 
 
BTW, it's not just insurance salesmen that using VAs for income planning.  Some of the best and brightest financial planners are using VAs as a portion of the income plan for their clients.  You need to rethink your income strategy, not just focus on the cost. 









 
7-8% return on investments? MAYBE i'll give you that. Going to prior example, it depends when you open the annuity and what kind of market you land on. (Please refer to my previous post and fees)
 
The way I see it is that the guarantee of the insurance companies don't mean much. They can talk about their sharpe ratios and their hedging strategies all day long. If everyone's mutual fund crashes AND the CDs ever go below 3%, chances are our economy isn't looking too great. At that point, how many insurance companies do you think are left in the country? Going back to the liquidity issue, example: John Smith is 50 years old and needs an investment to guarantee income for the rest of his life. Assuming he lives till he's 85, how many emergencies do you think he will have that would trigger lump sum withdraws during the next 35 years? Everyone on this board is probably around that age, so let me ask you guys this, how many emergencies have YOU had during your lifetime? College tuition, surgery, medical reasons, children, etc.
 
This is not to say I don't believe CDs are the perfect income solution, but it's just to say I think it's a better route for these ultra conservative clients.
 
The way I see it, the guarantees of the insurance companies mean everything.  Insurance companies are required by law to have a certain amount of cash on hand to cover their liabilities.  All of these riders are considered liabilities.  In addition to that the good ones have reinsurance.  So, if the insurance company goes out of business, then a reinsurance company steps in. 
 
My clients have asked that same question about what if everything crashed.  First, banks wouldn't be around to give you CDs as they have crashed because everyone would have pulled all of their money out of the banks to literally stuff under their mattresses.  That would make the sub-prime mess look like a cake walk.  So, now where are you going to get a 3% CD smart guy?  Second, if all mutual funds tanked, it means that all companies have stopped producing, shipping, and selling their products or services.  For sure, we'd be talking about economic meltdown.  At that point I don't really care what that paper says your worth, cause if you don't have something to trade for my corn, or beans, or cattle, then your paper is only good for one thing.  So, if you think there's a greater possibility of that happening than there is of the US and global economies cycling back into prosperity again, we don't need to be talking about buying CDs, annuities, stocks, or even gold.  We need to be talking about buying lead.  And gunpowder.  Cause if you can't mold bullets, load a gun, hit where you're aiming, kill it, clean it, cook it, eat it...it doesn't mean squat to me. 
 
These riders don't have anything to do with sharpe ratios and hedging strategies.  They have to do with protecting your clients against you statement -  "it depends when you open the annuity and what kind of market you land on."  So, if we have a great 90's like market, perfect, we'll capture the annual increase in benefit base as the market goes up.  If we have a flat or down market, it sucks, but your income base is guaranteed to double in the next 10 years.  If your contract value does also, or does even better, bonus money!!
 
I also agree with the last poster who said that you shouldn't put all of a clients money into a product like this.  Simply because there might be a need for extra income.  For that money, but them the CD.  See, you can have your cake and eat it too. 
Sep 5, 2008 3:27 pm
Cowboy93:

I don't understand why the guy titled this "Intelligent" conversation...if you have your mind made up, apparently there is no changing your mind.


Bottom line:  a CD or other fixed income instrument gives you the coupon as the absolute BEST case scenario, while a VA invested in equity subaccounts gives a CD/bond like return as the WORST case scenario.
 
It is NOT like having a car loan and not driving the car...it is like "throwing away" money on homeowner's insurance because your house probably won't burn down.  And your lump sum example presumes you put all of someone's $ in a VA and it has a 35 yr surrender period....anyone with half a brain in our business doesn't use one vehicle and treat it like the perfect solution (so doesn't allocate 100% to it).
 
The good news it that it is easy to compete against people like ChrisV when talking to a client or prospect.
 
Actually, I have NOT made up my mind yet, I was hoping to look to this forum for some insight I might not of come across. I'm not trying to offend anyone here, I'm just trying to view both sides of the spectrum.
 
Bottom line:  a CD or other fixed income instrument gives you the coupon as the absolute BEST case scenario, while a VA invested in equity subaccounts gives a CD/bond like return as the WORST case scenario.
 
Refer back to my previous post where a 5/6% guarantee income rider might be the ONLY scenario your client might be the ONLY scenario your client can receive (due to the extreme fees, please refer to my first post).
 
It is NOT like having a car loan and not driving the car...it is like "throwing away" money on homeowner's insurance because your house probably won't burn down.  And your lump sum example presumes you put all of someone's $ in a VA and it has a 35 yr surrender period....anyone with half a brain in our business doesn't use one vehicle and treat it like the perfect solution (so doesn't allocate 100% to it).
 
Hey if there was a FREE type of homeowner's insurance I would jump on it too considering it provided me comparable protection. Sure, you might not put ALL your client's money into a VA, but what if you put 25%? 25% of something is still something. Why not have that 25% free of fees AND completely liquid. Because that's exactly what CDs are, FREE and LIQUID.
 
The good news it that it is easy to compete against people like ChrisV when talking to a client or prospect.
 
No need for personal attacks, I'm just here to learn just like everyone else.
Sep 5, 2008 3:41 pm

[/quote]

 
The way I see it, the guarantees of the insurance companies mean everything.  Insurance companies are required by law to have a certain amount of cash on hand to cover their liabilities.  All of these riders are considered liabilities.  In addition to that the good ones have reinsurance.  So, if the insurance company goes out of business, then a reinsurance company steps in. 
 
My clients have asked that same question about what if everything crashed.  First, banks wouldn't be around to give you CDs as they have crashed because everyone would have pulled all of their money out of the banks to literally stuff under their mattresses.  That would make the sub-prime mess look like a cake walk.  So, now where are you going to get a 3% CD smart guy?  Second, if all mutual funds tanked, it means that all companies have stopped producing, shipping, and selling their products or services.  For sure, we'd be talking about economic meltdown.  At that point I don't really care what that paper says your worth, cause if you don't have something to trade for my corn, or beans, or cattle, then your paper is only good for one thing.  So, if you think there's a greater possibility of that happening than there is of the US and global economies cycling back into prosperity again, we don't need to be talking about buying CDs, annuities, stocks, or even gold.  We need to be talking about buying lead.  And gunpowder.  Cause if you can't mold bullets, load a gun, hit where you're aiming, kill it, clean it, cook it, eat it...it doesn't mean squat to me. 
 
These riders don't have anything to do with sharpe ratios and hedging strategies.  They have to do with protecting your clients against you statement -  "it depends when you open the annuity and what kind of market you land on."  So, if we have a great 90's like market, perfect, we'll capture the annual increase in benefit base as the market goes up.  If we have a flat or down market, it sucks, but your income base is guaranteed to double in the next 10 years.  If your contract value does also, or does even better, bonus money!!
 
I also agree with the last poster who said that you shouldn't put all of a clients money into a product like this.  Simply because there might be a need for extra income.  For that money, but them the CD.  See, you can have your cake and eat it too.  [/quote]
 
I do believe that most insurance companies will have enough assets to follow through with their payouts. However, my point is that it's STILL the US Government insurance vs ONE (out of hundreds) of company's insurance out there.
 
If we have a flat or down market, it sucks, but your income base is guaranteed to double in the next 10 years.  If your contract value does also, or does even better, bonus money!!
 
Why would an income base that disburses 5-6% every year matter when my ACCOUNT VALUE can double in 14 years and fully liquid whenever I need to withdraw. The insurance company LOCKS you into a 5%/6% withdraw for the rest of your client's life. Quite honestly, how many of your clients would keep a VA for the next 30 yrs? When they're out of surrender they might go into a different type of investment and then lose the income benefit they've been paying for all these years.
 
My clients have asked that same question about what if everything crashed.  First, banks wouldn't be around to give you CDs as they have crashed because everyone would have pulled all of their money out of the banks to literally stuff under their mattresses.  That would make the sub-prime mess look like a cake walk.  So, now where are you going to get a 3% CD smart guy? 
 
My argument was that if CDs EVER go below 3%, then the whole economy would've crashed by now. When it does, what would you rather have? An empty insurance policy on your mutual funds that you've been paying all these years for? Or some CDs that have been earning you 1% less interest, BUT you can now walk away with free of charges.
Sep 5, 2008 4:14 pm
Spaceman Spiff:
The way I see it, the guarantees of the insurance companies mean everything.  Insurance companies are required by law to have a certain amount of cash on hand to cover their liabilities.  All of these riders are considered liabilities.  In addition to that the good ones have reinsurance.  So, if the insurance company goes out of business, then a reinsurance company steps in. 
 
My clients have asked that same question about what if everything crashed.  First, banks wouldn't be around to give you CDs as they have crashed because everyone would have pulled all of their money out of the banks to literally stuff under their mattresses.  That would make the sub-prime mess look like a cake walk.  So, now where are you going to get a 3% CD smart guy?  Second, if all mutual funds tanked, it means that all companies have stopped producing, shipping, and selling their products or services.  For sure, we'd be talking about economic meltdown.  At that point I don't really care what that paper says your worth, cause if you don't have something to trade for my corn, or beans, or cattle, then your paper is only good for one thing.  So, if you think there's a greater possibility of that happening than there is of the US and global economies cycling back into prosperity again, we don't need to be talking about buying CDs, annuities, stocks, or even gold.  We need to be talking about buying lead.  And gunpowder.  Cause if you can't mold bullets, load a gun, hit where you're aiming, kill it, clean it, cook it, eat it...it doesn't mean squat to me. 
 
These riders don't have anything to do with sharpe ratios and hedging strategies.  They have to do with protecting your clients against you statement -  "it depends when you open the annuity and what kind of market you land on."  So, if we have a great 90's like market, perfect, we'll capture the annual increase in benefit base as the market goes up.  If we have a flat or down market, it sucks, but your income base is guaranteed to double in the next 10 years.  If your contract value does also, or does even better, bonus money!!
 
I also agree with the last poster who said that you shouldn't put all of a clients money into a product like this.  Simply because there might be a need for extra income.  For that money, but them the CD.  See, you can have your cake and eat it too. 
 
Spiff,
 
By far and away, the best post I've ever seen you post!
Sep 5, 2008 4:16 pm

I just posted about how the market really works (and I believe that), but let's look at the following scenario:


You put $100,000 into a VA in October 2007 and began taking the guaranteed 5% income. The account goes down due to market fluctuation, and it's value is further reduced by your withdrawals and fees. So, worst case scenario, you get your initial investment back over 20 years. (I'm talking about the old Marketlock feature with AIG.)
 
Scenario 2 is that you buy a 20-year bond paying 6% with your $100k. Assuming it goes the full term, you'll get back your $100k and you've pocketed $120k in income over that time period. (Sounds like I'm defending the Boones, doesn't it?)
 
I guess this is where I have difficulty with the VA. For all intents and purposes, you lose liquidity with the VA and you're only guaranteed to get back your principal over 20 years. The bond provides a stream of income that is predictable and independent of what will "most likely" happen with the VA.
 
This is a good discussion; however, I'd like to see anyone make a living by selling CDs.
 
Sep 5, 2008 4:18 pm

Chris,

 
I think you should ask this question on w w w . r e g r e p s . c o m.  Ask for Bobby.  He might be able to give you some information regarding this stuff.
 
Also, you should call Allianz or Pru and have them send you an Andex chart for your wall.  Step about 10 feet away it, and look at the lines. 
Sep 5, 2008 4:41 pm
Borker Boy:

I just posted about how the market really works (and I believe that), but let's look at the following scenario:


You put $100,000 into a VA in October 2007 and began taking the guaranteed 5% income. The account goes down due to market fluctuation, and it's value is further reduced by your withdrawals and fees. So, worst case scenario, you get your initial investment back over 20 years. (I'm talking about the old Marketlock feature with AIG.)
 
Scenario 2 is that you buy a 20-year bond paying 6% with your $100k. Assuming it goes the full term, you'll get back your $100k and you've pocketed $120k in income over that time period. (Sounds like I'm defending the Boones, doesn't it?)
 
I guess this is where I have difficulty with the VA. For all intents and purposes, you lose liquidity with the VA and you're only guaranteed to get back your principal over 20 years. The bond provides a stream of income that is predictable and independent of what will "most likely" happen with the VA.
 
This is a good discussion; however, I'd like to see anyone make a living by selling CDs.
 
 
You're comparing two different things.  People buy equities for growth and income (mutual funds, etfs, vas, etc) and Bonds for Income.
 
I just met with a client who wants to invest for growth and income.  I told them we can invest in mutual funds and withdraw at a rate of 5% for as long as we can or invest in a va where he and his wife will be able to withdrawal at 5% for the rest of their lives.
 
The way I look at it is if the market trends upward like it always has it doesn't really matter whether they chose the mutual funds or the VA.  However if the market continues to go down or goes flat, they would have wished they were invested for growth and income within a VA which has a Joint GWB For Life rider.
 
 
Sep 5, 2008 5:04 pm
snaggletooth:

Chris,

 
I think you should ask this question on w w w . r e g r e p s . c o m.  Ask for Bobby.  He might be able to give you some information regarding this stuff.
 
Also, you should call Allianz or Pru and have them send you an Andex chart for your wall.  Step about 10 feet away it, and look at the lines. 



If you're going to promote the "alternate website" run by "Bobby", make sure that you are fair and that you also tell them about how he has a long history of getting pissed off at people that disagree with him, and how he normally bans them or even worse uncovers their real identity and then posts it all over his website and others.

Sep 5, 2008 9:19 pm
I don't fact check you very much as you are usually right on target, but you can absolutely get 5% and more on CDs right now.  I see over 5% in as little as five-year maturities.
 
Thanks, Indyone, you are correct.  I'm wrong.  I didn't bother looking and I shouldn't have posted that.  I pride myself on telling my clients "I don't know."  It's much better than giving wrong info and I try to never give wrong info here.
Sep 5, 2008 9:34 pm
Hi Anonymous,
 
I have read some of your posts and I must admit, you provide some very good knowledge. Same example, Joe has 100k IRA and needs 200k in 10 years for retirement. VA would only provide you 200k (provided we compounded at a 7% using a rider) for your income base value DISBURSED at 5/6% ever year. A CD compounding at 5% for 10 years would provide 162k fully LIQUID. Even with different surrender schedules, I see VAs as a LIFETIME investment product that is not liquid at all. What's the point of surrendering a contract you've been paying EXTRA FEES for if you're NOT going to use the income benefits. That's like financing a car and paying interest when you have no intention on driving it.
 
1)Who are you using for your 10 year CD paying 5%? 
2) Forget the income base.  If I'm going 10 years, more than likely, I am using a 0% GMAB.
3)The VA isn't going to provide $200,000.  It is going to provide whatever the subaccounts provide but no worse than $100,000. 
4)A CD at 5% would provide $162,000 and GUARANTEE that the client won't achieve his financial goal.
5)A VA isn't very liquid, but neither is a 10 year CD.  Of course, since I use these almost exclusively in IRA's with a decent time horizon, liquidity isn't much of a concern.
6) If I put someone in a VA, they are always using the guarantee.  The way that my clients use these guarantees is that they allow the guarantees to influence their investor behavior. 
 
Put yourself in the shoes of a 55 year old very conservative investor who can't stomache losses.  Your #1 goal is to retire in 10 years with $3,000/month of income.  In order to do this, your IRA must get a 7% return between now and 65.  Would you buy a 5% CD that is guaranteed to cause you to not reach your primary goal or would you invest aggressively and try to get a 7% return, but pay for a guarantee that won't allow you lose money?  Or would you do something else.  
 
In the right situation, I see the upside of the VA to be much higher than a CD and there isn't much of a downside.