Fixed indexed annuity, not for everyone, but...

[frenchieinme]

The boss and I attended a couple of seminars for retirees or soon to be retired people. I like to attend some of these for two reasons: (1) to keep in touch with ideas of how to best meet our reitred financial needs and (2) we always get a good meal thrown in the process.

It appears the new twist on annuities is what is called a FIXED INDEXED ANNUITY. It is not for everyone but it may play into someone's retirement plans. Basically it is an annuity tied to some benchmark index, (e.g., S&P 500) and based on the performance of its index, one gets a % of that amount of index increase and one can never go below that amount. The latest financial person compared it to playing blackjack and always keeping half of your winnings and never losing.

Like any annuity, there is a holding period (usually 5 to 10 years) where if you take any of the principal, there is a surrender fee. Done properly this becomes another financial tool to meet one's financial retirement goals.

A caveat here IMHO, annuities are not for everyone. I know people who have invested a large amount of money (high 6 digit figures) and are comfortably receiving monthly payments for the rest of their lives and when one dies the other gets a large amount of the monthly payment for the rest of their lives.

In summary, a fixed indexed annuity is worth looking into to see if it can be of some use to you in retirement. One needs to keep in mind such a product should be discussed with a professional well versed in this product and who is looking for your total financial benefit and not a larger commission for themselves.

Thought you would like to know.

frenchieinme

 

[Dave M]

It appears the new twist on annuities is what is called a FIXED INDEXED ANNUITY. It is not for everyone....

That's for sure! The info (including responses) at this link explains much better than I can why one should be wary of this product.

 

[Icc5]

Annuity Fees can eat you alive

The boss and I attended a couple of seminars for retirees or soon to be retired people. I like to attend some of these for two reasons: (1) to keep in touch with ideas of how to best meet our reitred financial needs and (2) we always get a good meal thrown in the process.

It appears the new twist on annuities is what is called a FIXED INDEXED ANNUITY. It is not for everyone but it may play into someone's retirement plans. Basically it is an annuity tied to some benchmark index, (e.g., S&P 500) and based on the performance of its index, one gets a % of that amount of index increase and one can never go below that amount. The latest financial person compared it to playing blackjack and always keeping half of your winnings and never losing.

Like any annuity, there is a holding period (usually 5 to 10 years) where if you take any of the principal, there is a surrender fee. Done properly this becomes another financial tool to meet one's financial retirement goals.

A caveat here IMHO, annuities are not for everyone. I know people who have invested a large amount of money (high 6 digit figures) and are comfortably receiving monthly payments for the rest of their lives and when one dies the other gets a large amount of the monthly payment for the rest of their lives.

In summary, a fixed indexed annuity is worth looking into to see if it can be of some use to you in retirement. One needs to keep in mind such a product should be discussed with a professional well versed in this product and who is looking for your total financial benefit and not a larger commission for themselves.

Thought you would like to know.

frenchieinme

Had an annuity during the time my kids were growing up for a couple reasons.
#1 Insurance in case something happened to me/wife.
#2 Turn in to fund their education.
#3 Was already fully invested in IRA'S and 401K plan
#4 Own several stocks and wanted something different

We cashed in the annuities after holding them for 13 years and got back what we had put in almost to the penney. They worked for what we needed them for but always saw large amounts taken out for insurance costs and fees to the person that sold them to us.
I think you can do much better (elderly) for retirement in mutual funds or if willing to take more risk in stocks.
To each their own.
Bart

 

[Black Diamond]

We cashed in the annuities after holding them for 13 years and got back what we had put in almost to the penney. They worked for what we needed them for but always saw large amounts taken out for insurance costs and fees to the person that sold them to us.
I think you can do much better (elderly) for retirement in mutual funds or if willing to take more risk in stocks.
To each their own.
Bart

HIGH COST AND LOW RETURNS!!

HIGH SALES COMMISION SALESMAN!!
AND LOW PAYOUT INVESTOR!!!

I shoot for doubling my money evry 12 years NOT just break even!!

I am truly a novice investor but never pay high a commision to help a saleman get rich and make the company a big name in town!!

Put the money in the bank at 3 % and double your money in about 24 years!!!

 

[IML726]

An annuity of any type is the last place a person should invest for retirement. Fixed annuities are generally not worth it b/c of exactly what Black Diamond stated, high cost and low return.

Maxing out an IRA and company sponsored plans should be the first avenue for investments. Currently an IRA is limited to 4K per year and a 401K is 14K per year w/out the catch up provisions for Sr. Citizens. So that's 18K per individual or potentially 28K if a spouse has a retirement plan through work. If one can invest more than that, then they can look at an annuity for a tax deferred investment.

I wouldn't recommend putting the money in a bank at 3% either. After taxes and inflation, it would lose value over time. A better option would be to open a non-qualified account and invest into mutual funds. You dont get the tax defferal, but you get into a investments with higher growth potentials that would outpace inflation as well.

 

[Kal]

...Put the money in the bank at 3 % and double your money in about 24 years!!!

You might want to run a spreadsheet on that one. Don't forget to include taxes and inflation. My guess is you will not even get back your cash outlay.

 

[Icarus]

Any investment that has to be sold at a seminar is probably not worth considering. These investments pay fat commissions to the salesperson and the surrender charges are needed to pay for those commissions.

I think you should stop attending them. The free meal isn't worth it.

If you really want an annuity, there are companies like Vanguard that sell low cost annuities. Commissioned sales people don't sell them because they don't pay commissions.

-David

 

[Brett]

Any investment that has to be sold at a seminar is probably not worth considering. These investments pay fat commissions to the salesperson and the surrender charges are needed to pay for those commissions.I think you should stop attending them. The free meal isn't worth it.If you really want an annuity, there are companies like Vanguard that sell low cost annuities. Commissioned sales people don't sell them because they don't pay commissions.

I'll agree, pass on the free lunches and get independent research before purchasing any financial product. Even if if you think you are getting good advice from a locally sponsored "seminar" the products mentioned most likely carry very high commissions.

 

[Tom R]

First thing I learned on TUG was...do not buy at the seminar...from the developer...too high slaes cost !

Same thing applies with annuities. If you determine they DO fit inot your investment planning goals...take a look at Vanguard...I believe they offer a variety of annuity products w/o the excessive sales costs...kind of like TS "re-sale".

Tom R

 

[mishugana]

CGA

I have done a charitable gift annuity i got almost 6% plus got big tax writeoff im not married with no kids so i dont mind the charity getting the money when idie and about a third of it is not taxed

 

[Elan]

There are federal tax exempt bond funds that yield over 4.5% currently. If you're in the 28% tax bracket, that's 6.25% pretax equivalent. Not bad for a low risk investment.

 

[frenchieinme]

So that's 18K per individual or potentially 28K if a spouse has a retirement plan through work. If one can invest more than that, then they can look at an annuity for a tax deferred investment...

.

As I said, not for everyone but then again it might...

frenchieinme...

 

[frenchieinme]

Any investment that has to be sold at a seminar is probably not worth considering. These investments pay fat commissions to the salesperson and the surrender charges are needed to pay for those commissions.

I think you should stop attending them. The free meal isn't worth it.

If you really want an annuity, there are companies like Vanguard that sell low cost annuities. Commissioned sales people don't sell them because they don't pay commissions.

-David

I am not pushing nor have I bought any annuity. I am simply passing on what has been the latest item of interest in financial seminars.

As for the meal, I think it is worth it. Let's see, I have had this year prime rib, baked haddock, etc... Well worth it from my point of view as long as I stay away from buying an annuity which I really don't want nor need.

frenchieinme

 

[Icarus]

In your OP, you said:

In summary, a fixed indexed annuity is worth looking into to see if it can be of some use to you in retirement.

To me the implication of that statement is that you bought into the "logic" of the investment as presented at the seminar. You posted the information here presumably because you thought it might be worthwhile for some people to consider.

Or, perhaps, subconsciously, you thought there might be something "wrong" with it, and wanted to see what experts like Dave M and others might think about it?

Yes, I think it's similar to when the uniinitiated attend a timeshare presentation given by the developer. They will show you all sorts of reasons on paper why your "investment" at developer pricing will pay off, while at the same time, saying pretty much anything (including lies not committed to paper) to discourage purchase at resale from anybody but the developer.

A product like this is worth it only to the person collecting the commission.

Leave it to the insurance industry to come up with a product so complicated that nobody can really figure it out or reasonably calculate what your investment might yield at maturity. There's a reason this type of investment is not regulated by the SEC or NASD .. probably because it would never fly there.

You know what they say about free lunches, right?

Sure, annuities themselves (not this type) might make sense for many people, but only if you research them very carefully and buy the low-cost, low-fee, no commission variety offered by reputable companies like Vanguard.

-David

 

[bogey21]

I have been living off a fixed anuity plus Social Security, both of which have an annual cost of living kicker, for the last 6 years. When I die my ex-wife gets 60% of my current benefit for the rest of her life (I am 72, she is 52). I don't ask the bartender to turn on CNBC; I don't have to read the Wall Street Journal religiously; I'm not calling my broker every 15 minutes to check on the market; and I'm not a nut case if the Dow goes down 200 points. My risk is the financial stability of the company sending me my monthly payments. I do track them carefully.

GEORGE

Added: The annuity is not indexed to anything. Only the annual cost of living is.

 

[Icarus]

George,

This thread is about the investment called a "fixed index annuity". It's not about all annuities.

-David

 

[frenchieinme]

In your OP, you said:



To me the implication of that statement is that you bought into the "logic" of the investment as presented at the seminar. You posted the information here presumably because you thought it might be worthwhile for some people to consider.

Or, perhaps, subconsciously, you thought there might be something "wrong" with it, and wanted to see what experts like Dave M and others might think about it?

Yes, I think it's similar to when the uniinitiated attend a timeshare presentation given by the developer. They will show you all sorts of reasons on paper why your "investment" at developer pricing will pay off, while at the same time, saying pretty much anything (including lies not committed to paper) to discourage purchase at resale from anybody but the developer.

A product like this is worth it only to the person collecting the commission.

Leave it to the insurance industry to come up with a product so complicated that nobody can really figure it out or reasonably calculate what your investment might yield at maturity. There's a reason this type of investment is not regulated by the SEC or NASD .. probably because it would never fly there.

You know what they say about free lunches, right?

Sure, annuities themselves (not this type) might make sense for many people, but only if you research them very carefully and buy the low-cost, low-fee, no commission variety offered by reputable companies like Vanguard.

-David

You do not know how off base your comments are. I have not bought into anything, it has nothing to do with thinking anything is wrong either consciuosly or subconsciously nor anything else.

All I wanted to bring out is the fact I have been attending financial planning meetings, have been geeting free meals for attending (yup, there is something free here and the meals were delicious), and most importantly a shift nin presentation of products has occured, i.e., a product called a fixed indexed annuity. I thought I would put it forward for dicussion and I have found the most interesting input to date to be Dave M's response.

I should have mentioned the FIA MIGHT be something one would like to look into. I guess a little word left out can cause one to be psychoanalysed. Believe me, I simply wanted to open a discussion on this topic for people in planning stages of retirement might use in their decision making process. I believe this has happened.

In summary, based on the input generated I believe one might rightfully draw the conclusion the FIA is not what it might at first appear to be. Comparing it to timesharing presentations by developers is probably the most to the point insult one can give the FIA. :hysterical: That is holding no punches.

Have a day

frechieinme

 

[Icarus]

Sorry, I didn't mean to get you upset or insult you. I apologize.

I should have mentioned the FIA MIGHT be something one would like to look into.

I guess I don't understand why anybody might want to look into it. I can't imagine that there's anything good in this thing for anybody, except the salesperson. My advice is to steer clear of these sorts of things.

But that's just my own personal opinion. And my advice is worth exactly what you paid for it. And I don't give free meals.

-David

 

[Brett]

"Free lunches. Free dinners. You will not be sold anything!

An article about the problems in equity annuities in today's Washington Post -

http://www.washingtonpost.com/wp-dyn/content/article/2007/10/06/AR2007100600106.html

"Free lunches. Free dinners. You will not be sold anything! Of course, this kind of hype is used to sell a variety of investments, not just equity indexed annuities..... We really detest the free-lunch seminars where they say they won't sell you anything, but they're designed to create a follow-up appointment in the home,"

 

[KenK]

They learned it from the Timeshare industry......who probably learned it from the 1950s & 60s realty sales groups like General Development Corp ( NY Post/ Daily News ad:

("Come on Down....Cape Coral lots...Port St Lucie Lots... free dinner at the Statler with no obligation...)... or the free airfare and hotel stay currently run by the National Recreation Properties...( Wow look at that ocean/gulf view from their air borne films...lots in Lehigh Acres...SW Fl fastest growing...or is it Hot Springs???)


I just received Kiplingers Retirement Report, and they also have an article about some kinds of new annuities. I'll post a few lines when I figure out what they are talking about,,,,but in general...I don't think they give it high marks. ( Might not even be what Frenchie is talking about)....but what I remember reading more negs than pos.

 

[pwrshift]

The 76 million boomers who start retiring next summer must answer two questions: 1. What is the proper mix of bonds and stocks? 2. How much money can be drawn annually from the investment portfolio? At no time should you withdraw more than 4% to allow for market volatility.

This insecurity of investment return is the reason so many people get drawn into annuities. Vanguard's Wellesley Income Fund, for example, has a mix of 60% fixed income funds with 40% equities, a yield of 4.28% since inception in 1971 and a MER of .25%. However, it has been down in just 5 of those years with a maximum loss of 6.28% ... and therein lies the problem for those who want their income fixed ... and why some are easier prey for annuity salesmen. Even the best funds go up and down.

The advantage of having an estate residual for your heirs takes you away from annuities but puts you back into the insecurities of stock market investment and annual yields. If you have no heirs, your income outlook might be considerably different and annuities do have some tax advantages that mutual funds/equities do not.

As long as CITI and Bank of America will be around for the next 30 years or so, the recent drop in financial stocks like these gems created an investment opportunity many of us haven't seen since 1992 .. where dividend yields and stock appreciation were high on my buy list, netting out at about 7% in some cases with good upside to stock price. But again, some people just don't want to play that game anymore.

Brian

 

[bogey21]

The boss and I attended a couple of seminars for retirees or soon to be retired people. I like to attend some of these for two reasons: (1) to keep in touch with ideas of how to best meet our reitred financial needs and (2) we always get a good meal thrown in the process.

Hey, I attend these also. I also attended a Post Card Timeshare event. You never know what little gems you might pick up. For example at one of these events about a month ago I learned that in Texas those of us over 65 can defer paying our Property Taxes for 8% simple interest (of course whoever inherits the house has to bring them current). Didn't know that and most likely not interested, but I now know something new. Never know when it might become useful. And by the way I do know the difference between the fixed indexed annuities and the standard straight annuity I have.

GEORGE

 

[IML726]

In your OP, you said:

Leave it to the insurance industry to come up with a product so complicated that nobody can really figure it out or reasonably calculate what your investment might yield at maturity. There's a reason this type of investment is not regulated by the SEC or NASD .. probably because it would never fly there.

Depends on the annuity. Fixed annuities only require a life insurance license and therefore are regulated by the Department of Insurance of the individual states. A variable annuity requires a life insurance license and a securities license to sell. VA's must be registered w/ the SEC.

 

[Kal]

The last seminar I attended provided a 5-course dinner at Ruth Chris Steakhouse. The food was great! The only drawback was the speaker who distracted me from the wonderful meal and gratis wine. It was interested to note that the only product he mentioned was a fixed annuity tied to the S&P. It had a floor of 0% but was capped at 7%. For the life of me I will never understand an investment that limits upside earnings.

Now I have another invitation to a financial seminar at Maggiano's Little Italy Restaurant. Yum, another 5-course dinner. I don't miss too many of these things as a person can always learn some tidbits of investment information.

I don't buy a timeshare at timeshare presentations so there's no reason to even think about dropping a 6-digit investment into the hands of someone who gave me a fine free dinner. Yep, I think I'll have another glass of wine and a little more Tiramisu thank you.

 

[KenK]

Kiplingers has posted a Sept article here:
http://www.kiplinger.com/retirementreport/features/archives/2006/09/Cover_Sep2006_02_01.html

I was talking about an Oct article that has not been posted on their website yet.

BUT...they show a kind of formula using a variety of what they consider safe investments. Those include 60% S&P 500 Index fund, & 40% in a 5 yr CD @ .05% continious or daily compound ( those rates are a bit higher now) with a total worst case would leave $9778, but a bad case would really result in a total loss leaving you with $10,477...that is $477 more than the annunity

Another idea posted on another page is to join the profits they get in a BOA stock purchase. Something I also don't understant is one they presented with US IRS favorible tax treatments (??)

That Bank of America with tax favorable tax treatment is Preferred D (A rated)(BACXP.PK) selling @ $25.00 with a yield of 6.2% first call 2011.

What am I talking about??? Beats me... JUST SAY NO...and do it yourself.

Go to that website...they know what I'm talking about. (What they are talking about)