Selling annuities?

[yobo]

You raise a good point about the company offering the guarantee. Investors should always be informed and aware of who is offering the guarantee.

 

[brownsfan019]

Quote from birdman:

It's 6 years later in this thread - does anyone have additional insight into "Annuities" in mid 2011 or is it pretty much the same?

I have an appointment with Edward Jones to consider buying annuities.

As an ex-broker that sold these things, I highly recommend you get all fees laid out in a format you can read.

Annuities can make sense for the right situation; however, annuities also typically pay the broker very well - and that is due to all the fees that the insurance company attaches to the product. They can pay broker's a hefty fee to sell them b/c they already know that once your money is in, they got it locked up or you pay handsomely to exit the product early.

Just get all the fees clearly laid out and then you can decide from there. I don't know if Hartford still has it, but see if the Hartford Step product is still available or a variant in your analysis. I can't recall the exact name now, but every 5 or so years you can 'lock' the current value as your new base. So if you put $100k in and 5 yrs later it's worth $125k, you can call Hartford and say make this my new base.

 

[Free Thinker]

Quote from yobo:

With today's market environment, variable annuities are actually an interesting alternatives to bonds. There are products out there that pay a guaranteed 6% income yeild off your initial investment with 10% income raises every year if you hold the annuity for ten years.

You can therefore take advantage of the low equity prices with a balanced portfolio and have upside on your portfolio and potential income at retirement.

For example, you buy a $500,000 VA with a 6% income guarantee at purchase and invest the money in a 70/30 equity/fixed income split. In ten years, you are guaranteed a 10% rise annually on your 6% plus have additional upside if the portfolio increases in value. If the portfolio declines, it doesn't matter because your income is still guaranteed and if you have step up values, you can catch the rises in portfolio values during volitle up and down markets.

Try buying a bond with a 6% yeild that guarantees 10% upside each year. Plus unlimited upside if the portfolio increases in value. Current yeild on a ten year T-bond is less than 3% today. Makes you think doesn't it?

I'm not advocating putting all your eggs in one basket, but to have it be a piece of your retirement plan in order to guarantee income when you retire, makes a lot of sense. At least I think so.

Risk and volitility is free but guarantees cost money. Just my two cents.

yea. i have a friend that bought one of those 6% guaranteed annuities from ms. after loads the fees are 3% a year. 6%-3%=3%. you can do better in bank cds.

 

[birdman]

Quote from Free Thinker:

yea. i have a friend that bought one of those 6% guaranteed annuities from ms. after loads the fees are 3% a year. 6%-3%=3%. you can do better in bank cds.

Hmmmmmmmmm. interesting, i have interest bearing accounts as high as 2.2% but most are 1.25% and one of those does indeed offer bank cds at 3%

 

[elpistolero]

Birdman,
I currently sell life insurance and annuities for ING. I am in the process of getting my 7 and 66 to become an advisor. I will admit we get paid anywhere from 5% to 8% for an annuity. Make sure you find out how long the surrender period is and how much it will cost to access your money if you need to surrender the annuity. There is no need for you to be in a 10 year+ contract. Also the index annuities have improved and are out preforming a lot of the variable annuities. Make sure your advisor did his homework for you and he is not putting you in something that pays the most. All in all, annuities are a great asset if you fit the niche. Hope I could help and no I am not trying to sell anything to anyone with my first post

 

[birdman]

Quote from elpistolero:

Birdman,
I currently sell life insurance and annuities for ING. Hope I could help and no I am not trying to sell anything to anyone with my first post

Thanks for speaking up, my meeting is 3 days away and i appreciate all the tips i can get. Right now I'm leaning towards just parking excess funds in 5 year bank cds as it's still about 5 years til i plan to retire.

 

[sle]

Quote from Vinny1:

What are the advantages to an annuity over just buying some bonds for retirement income? I really don't see any advantages to annuities.

I assume you are talking about fixed annuities. The first advantage is the tax treatment (why this loophole exists I do not understand, but it does). The second one is the embedded longevity option, you are not going to run out of money even if you live to 120.

This said, pretty much evey annuity would be cheaper (even if you assume living to 120) to replicate yourself in your retirement account. I should have a spreadsheet some place that calculates a "fair" value of an annuity for some life expectancy given a treasury yield curve. Also, if are planning on retiring some time in the semi-remote future, you can lock in the forward rate for your annuity by simply rolling a linear combination of T-bond futures.

 

[sle]

Quote from yobo:
With today's market environment, variable annuities are actually an interesting alternatives to bonds. There are products out there that pay a guaranteed 6% income yeild off your initial investment with 10% income raises every year if you hold the annuity for ten years.

My experience hedging VA portfolios tell me that there was a time when VA guarantees wheren't fairly priced (meaning they were cheap for the protection they've provided). I am pretty sure this is not the case now, if anything VA guarantees are pretty rich. I am willing to bet that any payoff profile these products provide you can replicate yourself for a fraction of the cost.

 

[elpistolero]

Birdman,
I would be more then willing to over look anything you advisor suggests as a courteous. I guess I owe it to the members of the forum whom I have learned so much from. Once again just trying to help