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Opinion: How can I tell if an annuity is a good deal?

bogey21

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Opinion: How can I tell if an annuity is a good deal?

Annuities can work well. I have been living on one for the last 20 years. One problem is that they can be so damn complicated the average Joe can't be sure what he is buying. Another problem is most Annuity Salesmen are trying to sell you what works for them commission wise and not necessarily what is in your best interest...
 

VacationForever

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I lucked out when I bought my deferred income annuities 3 years ago. One of them was to start in 2032, 16 years later. I paid a lump sum of around $210,000 and it is locked in to pay $46K per year for 15 years, guaranteed payment in that if I die after annuity starts paying and they will continue to pay to my beneficiary for the full 15 years, otherwise they get the lump sum back if I die before annuity starts paying. It is pretty good returns.
 
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bogey21

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Annuities get a bad rap but there are good ones out there. I don't have, and have never researched Deferred Annuities, but see a place for them. For example I live in a CCRC. You can't believe how many people with a lot of money live here and won't spend it on anything as they are afraid of running out of money. A Deferred Annuity purchased say 15 or so years ago kicking in at say age 75 or 80 would have given them the ability to spend some of their money knowing exactly when their annuity would kick in...

George
 

cp73

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Annuities get a bad rap but there are good ones out there.

If you are disciplined you should be able to outperform the annuity doing it on your own and investing and withdrawing. They get a bad rap because they are usually terrible investments and the insurance companies make a boatload of money on them. At first glance the one listed above appeared to be good. But if you think that for 16 years that money wont be touched. If invested in market it should probably double twice before the first drawdown. That balance would be about $840,000 under most scenarios. Then the drawdowns are about 5.5%....of the total balance. My guess is at the end of the drawdown there is still a large sum of money that the insurance company keeps. I would like to see the worst 16 year period and what the annuity would have been worth under that time period. In that case it maybe ok. I just think they are too complicated and most dont understand what they are acquiring and whether its a fair deal. And in most cases you can't rely on the salesperson to inform you. How honest are timeshare salespersons?
 

VacationForever

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If you are disciplined you should be able to outperform the annuity doing it on your own and investing and withdrawing. They get a bad rap because they are usually terrible investments and the insurance companies make a boatload of money on them. At first glance the one listed above appeared to be good. But if you think that for 16 years that money wont be touched. If invested in market it should probably double twice before the first drawdown. That balance would be about $840,000 under most scenarios. Then the drawdowns are about 5.5%....of the total balance. My guess is at the end of the drawdown there is still a large sum of money that the insurance company keeps. I would like to see the worst 16 year period and what the annuity would have been worth under that time period. In that case it maybe ok. I just think they are too complicated and most dont understand what they are acquiring and whether its a fair deal. And in most cases you can't rely on the salesperson to inform you. How honest are timeshare salespersons?
I did not ask for the product and hence there was not a salesperson. We retired suddenly and I decided to buy a couple of annuities so that we spread out our risks and have different eggs in different baskets. I used an online annuities website to price out the payout, and companies, and decided the 2 annuities which I bought were right for us. You have nailed it when you used the word "disciplined". We do not want to actively manage what we saved and one of the baskets is managed by an investment firm. With various baskets we sleep well at night and are assured that we will never be poor nor run out of money.

Annuities companies do not take high risks by definition of what they are, and they invest money in relatively safe funds and they are unlikely to double twice in the 16 years. But it is no longer my problem. What deferred income annuities buyers gain is in mortality credits, like the good old tontine funds.
 

Brett

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If you are disciplined you should be able to outperform the annuity doing it on your own and investing and withdrawing. They get a bad rap because they are usually terrible investments and the insurance companies make a boatload of money on them. At first glance the one listed above appeared to be good. But if you think that for 16 years that money wont be touched. If invested in market it should probably double twice before the first drawdown. That balance would be about $840,000 under most scenarios. Then the drawdowns are about 5.5%....of the total balance. My guess is at the end of the drawdown there is still a large sum of money that the insurance company keeps. I would like to see the worst 16 year period and what the annuity would have been worth under that time period. In that case it maybe ok. I just think they are too complicated and most dont understand what they are acquiring and whether its a fair deal. And in most cases you can't rely on the salesperson to inform you. How honest are timeshare salespersons?


I completely agree - yet I'm still looking at annuities o_O. I will definitely put more time in researching annuities than timeshares !
Annuities are definitely good for my 98 1/2 old mother
 
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bogey21

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If you are disciplined you should be able to outperform the annuity doing it on your own and investing and withdrawing.

I'm not trying to be a smart ass here but let's face it some people are not as financially sophisticated as your are. For them an alternative to Bank CDs may be an annuity purchased from a major Insurance Company. Done correctly that can give them piece of mind throughout their retirement years...
 

Talent312

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Opinion: How can I tell if an annuity is a good deal?

By definition, they are not good deals.
They may help folks who lack the ability or discipline to manage their own investments.

Vanguard has stopped offering annuities. “While insurance-based options can be an appropriate choice for some investors, annuity administration is not central to our long-term product and service plans. We’re deepening our focus on our core priorities: delivering industry-leading funds and ETFs, enhancing the client experience, and expanding our advice capabilities,” said Karin Risi, Managing Director of Vanguard’s Retail Investor Group.
.
 
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tompalm

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For what it is worth. Below are some notes I took while looking at annuities.

My two cents is that you can put your money in a CD and get the same return. In the first example below with Schwab, you put $100,000 in and receive $106,000 after 10 years. The insurance company is making a killing on selling you this. Also, your salesman is making a lot of money. The sad thing is that some companies are not providing returns that equal 1 percent a year and keeping your money if you die. People really need to read every detail of what they are buying. We ended up keeping our variable annuity and rolling with the market with target funds. Fidelity has the best service and plenty to pick from. Nationwide has the lowest fees at $20 per month.

Nationwide

Variable Annuity $20 per month

has the most mutual funds to pick from

———————

Schwab

Immediate Income Annuity $100,000

period certain- life, 10 or 20 years

Life certain $462 month or $5500 year or 5.5 percent payout per year

10 year $888 month, or 10,000 yr, $106,000 back

If you die before insurance company pays $100,000 back, beneficiary gets remaining amount.

Fixed like a CD

10 years guarantee 2.1 percent

Fixed index SP 500 for 6,8,10 year guarantee period

Down side is zero. Up side 3.20 percent

10 years later account might be worth $135,000 or $100,000 or in the middle

Guarantee Pacific Life

————————————
Fidelity

Variable Annuity goes with market performance

Income or Immediate Annuity set up for income stream like Schwab

Fixed Deferred like a CD, see rates at table below


IMG_7085.JPG
 

tompalm

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Also, the fixed index based on the SP 500 provides a max of 3.2 percent a year. So this year the index is up 29 percent and the annuity is giving you 3.2 percent. No wonder they get a bad name.
 
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