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Annuities
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Author:  Tjnc35 [ Thu Oct 10, 2019 9:34 pm ]
Post subject:  Annuities

I wished I could take credit for it but I cant. Here's a response from my financial advisor about annuities. Thought I'd post it for others to read. Any thoughts?

"If an annuity fits your need then I think an annuity can be great. However, between life insurance and annuities, these are two of the most oversold investment products due to the commission they pay. Financial advisors are throwing people left and right into annuities often times when the client does not have a specific need for the annuity.

Now overall annuities do get a bad rap. Yes, there are some really bad one's but there are some good one's if 1) You are looking for safety and 2) If you have a need for lifetime income. Only social security, a pension and annuities can give you a lifetime income stream.

With that said, there are many types of annuities:
1) MYGA (Multi Year Guaranteed Annuity) These I call just a fixed annuity. It's a fixed rate for a fixed number of years. Think of it like a CD at the bank but it's issued by an insurance company. These would not benefit you because they do not have a lifetime income rider on them. They just pay out the interest.

2) Immediate Annuity. These are designed for you to drop a lump-sum of money into them and they WILL provide you with a lifetime income. The income is based on your age (mortality) and how much money you put into them. Typically, these annuities pay out the largest income stream of any annuity. Now buyer beware, often times an immediate annuity will not pay out the remaining balance if you were to pass away however some of the newer one's will. Just make sure you get one that will pay out at your passing. BTW, you can also buy these jointly so it will cover your spouse but it will reduce the income because now it covers two people versus one.

3) Deferred Annuity. Very similar to an immediate annuity but instead of taking income immediately, you're deferring the income for some time in the future so the money grows until you are ready to start the income stream.

4) Fixed Index Annuities. These can be confusing as hell but they can be beneficial for the right person. They are safe so you can't lose money in the stock market. The return from a fixed index annuity is based off of a stock market index. It could be from the S&P 500 or some other index. Where you have to be aware is the rate of return coming from a CAP where the annuity caps your return to a certain percentage? For example, you might have an option inside the annuity to have a pt to pt cap of 3% based on the S&P 500. That means if the S&P 500 goes up 8%, you'll only get 3%. If the S&P 500 loses 8%, then you'll lose 0%. I prefer the uncapped strategies inside of these annuities. Most do offer a lifetime income rider and these are normally done with a separate charge. I'd suggest 1.25% and lower is reasonable. Any more than that, run.

5) Variable Annuities. Want to know why annuities get a bad rap? Let me introduce you to the variable annuity. Out of hundreds of different variable annuities available, there are only two that I like for very niche purposes. A variable annuity offers you the ability to invest in mutual fund sub-accounts so you can lose money with these. They also offer lifetime income riders. However the really sticking point with these annuities is the hidden fees. Most will charge anywhere from 2.50% to over 3.50%. Most advisors will point out that these annuities have the "potential" to make more money than any of the other annuities but when you minus out the fees from your performance, most of these annuities fall flat.

Keep this in mind. Anytime you go with a lifetime income annuity, whether it be the immediate, the deferred, fixed index or variable annuity, all the insurance company is really doing is giving you back your principal and throwing in some interest on top of it. However, there is piece of mind knowing that if you live to age 100 that you're still going to have an income coming in. Matter of fact, if you want to pull one over on the insurance company, live to age 90+ because their mortality tables tell them that you more than likely won't live past age 85.

Sorry for the length. I hope this helps you out. You can always send me a PM if you want to bounce something off of me."

Thoughts?

Author:  Boynton [ Thu Oct 10, 2019 10:51 pm ]
Post subject:  Re: Annuities

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Author:  Tjnc35 [ Fri Oct 11, 2019 6:04 pm ]
Post subject:  Re: Annuities

Hello. That was a question I had for my financial advisor; nothing specific. Just needed to know his thoughts about annuities; annuities seem to receive good and bad reps. Thanks for the response. Nice excessive income philosophy. I will add a beer to that!

Author:  Jawanker [ Fri Oct 11, 2019 10:31 pm ]
Post subject:  Re: Annuities

Trust Boyton's advice, although I have never met him, he seems to be one of the sane posters on here.
And the pu*sy advice I totally agree with.

Author:  SinCity [ Sat Oct 12, 2019 12:56 am ]
Post subject:  Re: Annuities

Jawanker wrote:
Trust Boyton's advice, although I have never met him, he seems to be one of the sane posters on here.
And the pu*sy advice I totally agree with.


so u want the same advisor for gash & cash???

Author:  Jawanker [ Sat Oct 12, 2019 5:27 pm ]
Post subject:  Re: Annuities

SinCity wrote:
Jawanker wrote:
Trust Boyton's advice, although I have never met him, he seems to be one of the sane posters on here.
And the pu*sy advice I totally agree with.


so u want the same advisor for gash & cash???



Absolutely!

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