[lindaelane]

The *right* annuity can be great. Nine years ago I purchased Allianz 360. It has netted 5.3% a year. It has a 1.1% fee (so it grossed 6.4% a year). It cannot go down when the market goes down, but it goes up if the index it is linked to goes up (and the index will go up if "the market" is up). I can begin payments at any time - if I begin payments in September I get 7.36% of $250,000 for life (I'm now 66) - so about $18,400 each year - off a $150,000 original investment.

I've been very happy but I know I was very fortunate. There are many bad products out there.

Yes, the salesman makes around 7% commission on these products. Invest 100K, the salesman gets 7K.

It takes a great deal of financial knowledge to understand whether you are getting a good annuity or not. An average person is not likely to possess such knowledge.

Main drawback: Difficult to identify a good annuity.
Main plus: Safety, many years of high payments when the market may go bad.
Safety: No annuity has failed to pay in 150 years of the insurance industry - they are insurance.T he state pays if the company goes bad.

Warning: Do not take a "variable annuity". All are very high fee with danger from market volatility. The only purpose of this type of annuity is if you want to put more in a 401K than tax law allows, these are an alternative (but again high fee) vehicle.

[lisahathy]

Originally Posted by Boomer

Asking questions on TOTV is fine and can be a good place to start, but I hope you are going to do your own homework if you are considering buying an annuity. Actually, this thread will probably leave you with more questions than answers -- and that's not a bad thing.

I never got into annuities because I did not want to -- but you might want to -- so at the risk of sounding like I am giving you a homework assignment, may I pass along a few things for you to think about, to educate yourself.


Things I (sort of) Know (and/or think) about Annuities

1. Some people stop listening after they hear the word 'guaranteed' -- a powerful word, indeed -- and that's all they think they need to know. GONG!

2. I don't think of annuities as an investment. I think of them as a product because they are sold under a contract. It is like an insurance policy.

3. There are management expenses in those contracts somewhere. The company that sold the annuity invests your money while you get the contracted percentage. I don't think you ever see where your money is invested. It's kind of like you say, "Have at it, but just make sure the check is in the mail."

4. If the insurance company that sells the annuity fails, I think it then goes to some sort of rehabilitation fund. Then another insurance company can go to the state and say it will do the rehabilitating. That could take a while. (I don't know if this backup varies by state. Anyway, I think it is a good idea to know how the insurance company is doing before you buy in.)

5. There are different kinds of annuities. (I will not try to explain them all because I have never dug that deep.) But you can get started by reading up on Fixed Annuities v. Variable Annuities v. Index Annuities.


4. There are sometimes things that can be added to an annuity -- like a death benefit. The extras come at an extra cost to you.

5. I have never bought an annuity, but, as I understand it, there is a 30 day look back, like a window, after you have signed the contract, so you can change your mind. (But I do not know for sure if this is always the case, or if it varies by state or company. Find out, for sure.)

6. That word 'guaranteed' should maybe be thought of as being kind of like a faucet -- to be turned on and then to be turned off. If someone outlives the guaranteed time period, I think they might have to take the original investment -- sounds good -- but I am pretty sure the full amount would be taxed as ordinary income. That could be a chunk of change. Be sure to check on how that would work with the different types of annuities. Just something to be aware of.

7. For those who already have an annuity, they might want to know that there is something in the tax code that can allow an annuity holder to switch companies. It is called a 1035 Exchange -- but I don't know how it works. (I do wonder if those buying annuities have ever had the salesperson voluntarily explain that one.)

8. Most of the items listed above are things I know only a little bit about. I am not a financial advisor. I am just some nice, silver-haired lady on the internet, who is just trying to get you to do your own homework by giving you some things to think about and to understand before you buy an annuity.

9. One thing I do know for sure -- Never buy on the day you are being "sold."

Now then, aren't you glad you asked.

Mrs. Boomer

PS: Embrace your own critical thinking skills -- and enjoy that free steak dinner.

Great response! Thank you.

[rsmurano]

Originally Posted by WiseSpender

There are so many agents here selling all types of annuities here in The Villages. Usually that means something. If you see a lot of something being peddled for a very long time in a certain locale, it means that the item being peddled is being successfully sold in significant quantities to the locals . Up north, annuities are rarely mentioned anywhere , but down here in our community, it seems to be as natural a phenomenon as golf carts . I was wondering if any of you can impart any of your own experience with any annuity you purchased while down here (and who you purchased from), and how it has performed for you (if you could also provide numbers, rather than saying, "It has done well for me" or "It was a big mistake", that would be more useful).

Why would anybody get an expensive/over priced/under performing annuity? This is a terrible way to put your money. Even if you don’t know finance/the stock market, find a good broker (hard to find and I don’t use 1) or a friend that knows his stuff and invest your money that way.
In todays environment, I would invest in money market funds that pay 4% with low low fees and with really no risk. Then when things get back to normal, move this money to some good index funds and you will be better off than an annuity

[Hankofthedesert]

Yep...sort of like tons of Lawyer Billboards or highly profitable mattress stores...

[Robbb]

Originally Posted by lindaelane

The *right* annuity can be great. Nine years ago I purchased Allianz 360. It has netted 5.3% a year. It has a 1.1% fee (so it grossed 6.4% a year). It cannot go down when the market goes down, but it goes up if the index it is linked to goes up (and the index will go up if "the market" is up). I can begin payments at any time - if I begin payments in September I get 7.36% of $250,000 for life (I'm now 66) - so about $18,400 each year - off a $150,000 original investment.

I've been very happy but I know I was very fortunate. There are many bad products out there.

Yes, the salesman makes around 7% commission on these products. Invest 100K, the salesman gets 7K.

It takes a great deal of financial knowledge to understand whether you are getting a good annuity or not. An average person is not likely to possess such knowledge.

Main drawback: Difficult to identify a good annuity.
Main plus: Safety, many years of high payments when the market may go bad.
Safety: No annuity has failed to pay in 150 years of the insurance industry - they are insurance.T he state pays if the company goes bad.

Warning: Do not take a "variable annuity". All are very high fee with danger from market volatility. The only purpose of this type of annuity is if you want to put more in a 401K than tax law allows, these are an alternative (but again high fee) vehicle.

So the S and P 500 has exactly doubled since 2014, meaning your 150,000 investment would now be worth 300,000. At 5% it would be paying you 15,000 per year And you still have your 300,000.

[oneclickplus]

Originally Posted by Babubhat

Annuities is a word that should never be spoken. If you must go to Vanguard with lowest costs. car salespeople pushing a different product. Your money deserves better

Yup - annuities could be sold on the same lot as used cars and sold by the same folks. I worked as a programmer for many years in the Insurance Capitol (Hartford, CT). I saw the intimate, nitty gritty details of how each product was structured, the costs, the profits, etc. because I had to program this stuff. They all suck. Don't buy anything from an insurance company except insurance and then only TERM insurance and then only if you need it. Annuities are cr@p. Same with whole life, universal life, and anything else they come up with.

[JRcorvette]

Originally Posted by WiseSpender

There are so many agents here selling all types of annuities here in The Villages. Usually that means something. If you see a lot of something being peddled for a very long time in a certain locale, it means that the item being peddled is being successfully sold in significant quantities to the locals . Up north, annuities are rarely mentioned anywhere , but down here in our community, it seems to be as natural a phenomenon as golf carts . I was wondering if any of you can impart any of your own experience with any annuity you purchased while down here (and who you purchased from), and how it has performed for you (if you could also provide numbers, rather than saying, "It has done well for me" or "It was a big mistake", that would be more useful).

You need to know who you are buying form and fully understand all the facts about the annuity and the company including the small print. We have half our money in several annuities because we do not want to have to worry about the crazy Stock Market ups and down. We don’t have 20 years to recoup a big market loss. No retired person does. So for us having some money in an annuity is a safety net. Parady Investments is an excellent company to deal with. They just merged with a large company Risk Strategies but Parady is being run by the same people and doing the same thing they have been doing for years. We have done Very well with them. We are also keeping a chunk of Cash on the sideline.

[Andyb]

Originally Posted by WiseSpender

There are so many agents here selling all types of annuities here in The Villages. Usually that means something. If you see a lot of something being peddled for a very long time in a certain locale, it means that the item being peddled is being successfully sold in significant quantities to the locals . Up north, annuities are rarely mentioned anywhere , but down here in our community, it seems to be as natural a phenomenon as golf carts . I was wondering if any of you can impart any of your own experience with any annuity you purchased while down here (and who you purchased from), and how it has performed for you (if you could also provide numbers, rather than saying, "It has done well for me" or "It was a big mistake", that would be more useful).

With interest rates up and stocks and bonds losing money, the “right” annuity is a good option. Make sure it has low fees and bought through a replicable discount firm.

[Eg_cruz]

Originally Posted by Robbb

Any investment that has 10 pages of fine print explaining the investment means you are getting screwed. The fine print is not there for your benefit.

Not true
Purchase a mutual fund because they give you a book when you do that

[OhioBuckeye]

I bought an annuity several yrs. ago & it was the best thing I ever did, the company I bought it from I was told they don’t do it anymore because this company couldn’t make a profit but they are honoring the people that bought into it. When I die my wife will get a Ins. Settlement more than I have invested into it. So to answer your question, yes right now I’m tickled pink that we did it.

[Packer Fan]

Originally Posted by dewilson58

Here vs. up North...................Here: high concentration of old people looking for guaranteed payments during their final years.

That "guarantee" comes at a high price..................Low rate of return & High fees & lack of flexibility.

hmmm, interesting opinion. First- Since you use the "4% rule" to pull from a portfolio, and most Annuities pay out in the high 5s or low 6% range depending when you turn them on, not sure what you are talking about. Second, who cares about "fees", it is the money you get every month. Last, you don't put everything in an Annuity, just a portion of your portfolio to have steady income.
On top of that, the rate of return on my stocks and bonds in the past 2 years is negative, my annuities with gauranteed income riders went up.

[Packer Fan]

Originally Posted by mrf0151

Yes, Annuities are a high profit product for the company you purchase it from and the company selling it. For example, there is a company here in TV that sells annuities exclusively. They will go unnamed, but I can only say you see lots of people here in The Villages wearing the company's logo clothing and going to the parties they throw. You also see this companies' billboard signs all over TV. Where the heck people do you think this advertising money is coming from??? YOUR POCKETS!!

Please state your source of information on the "high profits". Can you even explain all the different types of annuities? I just put a large amount of money in MYGAs that pay 5.5% out as long as 7 years, I know for a fact my agent made very little money on them. Where else can you get those interest rates? SPIAs are also not a high profit product.
It is sort of like looking at American Funds who charge 5.75% to get in, and condemning the whole mutual fund industry for it.

Disclaimer - I don't have anything to do with selling annuities, but I have learned a lot, and own several as noted above and a few with income riders. I would suggest reading anything from Wade Pfau who is a professor for unbiased advice.

[Packer Fan]

Originally Posted by JRcorvette

You need to know who you are buying form and fully understand all the facts about the annuity and the company including the small print. We have half our money in several annuities because we do not want to have to worry about the crazy Stock Market ups and down. We don’t have 20 years to recoup a big market loss. No retired person does. So for us having some money in an annuity is a safety net. Parady Investments is an excellent company to deal with. They just merged with a large company Risk Strategies but Parady is being run by the same people and doing the same thing they have been doing for years. We have done Very well with them. We are also keeping a chunk of Cash on the sideline.

Finally a measured response with facts. Totally agree. I have my entire "minimum dignity floor" covered with gauranteed income - 2 small pensions, some annuities and of course the best annuity - Social Security.

If these annuity haters don't like annuities, they should not take their Social security.
Ed

[Atamasco]

Originally Posted by WiseSpender

There are so many agents here selling all types of annuities here in The Villages. Usually that means something. If you see a lot of something being peddled for a very long time in a certain locale, it means that the item being peddled is being successfully sold in significant quantities to the locals . Up north, annuities are rarely mentioned anywhere , but down here in our community, it seems to be as natural a phenomenon as golf carts . I was wondering if any of you can impart any of your own experience with any annuity you purchased while down here (and who you purchased from), and how it has performed for you (if you could also provide numbers, rather than saying, "It has done well for me" or "It was a big mistake", that would be more useful).

We have used Baum Financial Services and have been pleased with their services. They will also do your taxes.

[Packer Fan]

Originally Posted by guitarguy

No one buys an annuity, they are sold an annuity.
If you really want an annuity, vanguard sells them commission free.

Please provide your proof. I can tell you I have NEVER been sold an annuity and own several. I researched them, quoted them, and bought what made sense for me. I have several types, each for different reasons. I did a lot of research, starting with Wade Pfau's book and going from there. Most academics who do not sell annuities feel that most people should own at least a SPIA in retirement to provide a buffer against market moves.
Mine are part of a comprehensive plan I have for my retirement. Where else can you get a withdrawal rate of 6% with no risk? Where else can you get a 5.5% compound interest rate for 4-7 years but in a MYGA right now? I really think that people need to learn more versus just believing the haters.