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View Poll Results: Whats your thinking on annuities?
Would never consider one, ever 14 10.45%
Would consider one as part of my investments, if the numbers made sense 102 76.12%
Would put all or most of my money into one if the numbers made sense 6 4.48%
Would put all or most of my money into one because they're one of the better investment options 0 0%
Bought one, like it, would do it again 7 5.22%
Bought one, dont like it, wouldnt do it again 5 3.73%
Bought one, dont like it, but would consider buying one again 0 0%
Voters: 134. You may not vote on this poll

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Re: Annuities and their role in our investing plan
Old 01-29-2007, 04:23 PM   #41
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Re: Annuities and their role in our investing plan

There was a big scandal a few years back when several big British insurance companies folded because of their annuities. They had been paying rates they could not support. It ended up a political/legal issue about giving annuity holders a choice of reduced payments over time or higher payments until the company folded.
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Re: Annuities and their role in our investing plan
Old 01-29-2007, 05:01 PM   #42
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Re: Annuities and their role in our investing plan

Quote:
Originally Posted by donheff
I read somewhere that the British are REQUIRED to put a substantial portion of their retirement accounts into a life annuity at age 70. Does anyone know if that is correct? If so, who insures them and what kind of rates do they get?
Here's a link on the subject (if you have nothing else to do for the next month... )

http://www.dwp.gov.uk/pensionsreform/

I also thought this quiz on the UK Pension System was interesting (compared to the US):

http://www.dwp.gov.uk/pensionsreform/debate/quiz/
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Re: Annuities and their role in our investing plan
Old 01-29-2007, 10:46 PM   #43
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Re: Annuities and their role in our investing plan

I voted for #2 and #5. I purchased a fixed annuity, simply to diversify. It was a few years ago when rates were in the gutter. One is currently yielding 4% (initial rate was 5.5%). Other one is currently still at 6%. Both are religious fraternal societies.

Since a whopping 0.67% of my net worth is in them, I don't consider it a huge loss...just one of the many hedges I have.
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 12:19 AM   #44
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Re: Annuities and their role in our investing plan

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Re: Annuities and their role in our investing plan
Old 01-30-2007, 06:36 AM   #45
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Re: Annuities and their role in our investing plan

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Originally Posted by sgeeeee
So an annuity (even a small one) doesn't make sense for me right now at age 52. But I have no idea what will make sense for me in the future. Is something does make sense, I hope I have the sense to do it.
To test with my "real numbers" and using Fidelity's Retirement Income tool, I find that 20% of our portfolio, converted to a fixed annuity (10 year guaranteed, 100% to my DW/me upon the other's death, no inflation coverage) results in an additional $400K at the end of our forecast (age: 100). BTW, I/DW are 59 so I'm planning for a 41 year period of "retirement" (actually, the remainder estate is going to charity, so I don't have the "impact" of saving our estate for some future generation - that's also a consideration in an annuity).

Yes, I will persue the "20% solution" in July (after I get my cash balance settlement - I'm retiring May 1) to extend my plan. I need not "give it all up" as you suggest, with #3 (If I don't understand your comment, please correct me ).

- Ron
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 06:57 AM   #46
 
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Re: Annuities and their role in our investing plan

Quote:
Originally Posted by sgeeeee
Okay. Most of you are full of sh#t. CFB ended two of the options with the qualifier, "if it made sense." (choices #2 and #3) Yet very few of you selected #3. So . . . what you are saying is that you would not do something that made sense.

That makes no sense. Now, you may believe that #3 will never make sense, but that wasn't the option.

I have some pension benefits and SS coming. I feel comfortable with moderate risk. So an annuity (even a small one) doesn't make sense for me right now at age 52. But I have no idea what will make sense for me in the future. Is something does make sense, I hope I have the sense to do it.
Yup, you're exactly correct! But the poll was not searching for the truth. It was just trying to 'stroke a hairball'.
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 07:02 AM   #47
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Re: Annuities and their role in our investing plan

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Originally Posted by Ron'Da
Yes, I will persue the "20% solution" in July (after I get my cash balance settlement - I'm retiring May 1) to extend my plan. I need not "give it all up" as you suggest, with #3 (If I don't understand your comment, please correct me ).

- Ron
Are you using tax deferred or taxed funds?
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 07:45 AM   #48
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Re: Annuities and their role in our investing plan

I have a survivor annuity.If I did not have that I would definitely consider one . I read an article that stated you should consider one for your wife instead of going with the survivor option.I'm sure you guys will have fun running the numbers on that scenario.
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 07:51 AM   #49
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Re: Annuities and their role in our investing plan

One of my options with the federal government's 401K (our "TSP") is to put all or part into a fixed lifetime annuity with MetLife. You don't get the money back, but you get fixed monthly payments for life. At 62, I would get $681/month on every $100,000. Another option is actually the same thing, but inflation adjusted to a limited extent. That one would pay me $494/month on every $100,000. (This is just for me as a single person with no ten year guaranty or other frills.)

Since my combined social security and pension is abysmally low - - and even slightly lower than the minimum I feel I could survive on - - I have been considering this option for enough of my TSP that I could manage on it if I had to, during bear markets. That would probably be less than 1/3 of my account, and the other 2/3 or more I would continue to invest.

I have read that retirees with a good fixed pension are happier than those whose income varies with the market. That sounds like me since I find security to be appealing, but I have lived happily on a shoestring for most of my life. Of course, I would be saying "bye-bye" to any money that goes into this type of annuity, but my daughter will inherit from both her father and from me.

So far, 100% of the advice I have received elsewhere has been vehemently opposed, so I am still up in the air on this one. The main reasons I have been given are that you lose control of the money, and that interest rates are low compared with historical values so I would be getting less than I might have in other times.

My mother is 97 and still going strong, and I am in good health with a number of ancestors who lived to be over 100. So, I am basing my retirement computations on a projected age of 102, just to be safe.
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 07:59 AM   #50
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Re: Annuities and their role in our investing plan

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Originally Posted by donheff
Are you using tax deferred or taxed funds?
Annuity funded with tax deferred. I'll be splitting out my non-taxed funds (contributed in excess of the deferred) from my 401k before I do my roll over....

- Ron
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 08:02 AM   #51
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Re: Annuities and their role in our investing plan

Are annuities insured?? I lot can happen in 40 years, what happens
if you annuities writer (I assume its like mortgages, and they are
sold and transfered to other holding companies) goes belly up?
Tom
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 08:15 AM   #52
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Re: Annuities and their role in our investing plan

Quote:
Originally Posted by teejayevans
Are annuities insured?? I lot can happen in 40 years, what happens
if you annuities writer (I assume its like mortgages, and they are
sold and transfered to other holding companies) goes belly up?
Tom
Not insured. Insurers are required to hold excess capital as a cushion and are reasonably tightly regulated, but if they blow up, the only thing backing policyholders is the insurers' remaining assets and state-by-state guaranty funds, which are generally lightly funded and not backed by anyone.
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 08:24 AM   #53
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Re: Annuities and their role in our investing plan

Quote:
Originally Posted by teejayevans
Are annuities insured?? I lot can happen in 40 years, what happens
if you annuities writer (I assume its like mortgages, and they are
sold and transfered to other holding companies) goes belly up?
Tom
That's why you "spread it around" between different companies. Also, since I'm not comiting 100% of my retirement funds, I'm reducing the stated risk.

- Ron
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 08:41 AM   #54
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Re: Annuities and their role in our investing plan

I see only 2 advantages in buying an annuity investment product.

1. Tax deferral - In recent years the insurance companies have made annuities more attractive by offering more options like mutual funds and the concept of a variable annuity. They can be used as a "less restrictive" IRA for those of us below the age of 59-1/2. They can also free you from the required distributions when you reach 70-1/2. I have 1 fixed annuity that I plan to roll over (1035) into a variable annuity (to avoid a taxable event). John Hancock has a VA that will guarantee 5% even if the bears take over the market. I still have a lot to learn about it, though.

2. Income security - You basically trade a piece of your nest egg for a guaranteed monthly payment. The insurance company is risking that you will live long enough to erase their profit from the annuity. So, if you live to be 100, it might be a good deal. If you die at 70, well...........maybe it won't be. Actuaries make their living assuring insurance companies they will achieve solvency.

As the years have passed, I have tried to reduce my involvement with insurance companies. They think a lot like car dealers. I heard a speaker at a financial planning seminar say it like this, " A car salesman wants you to focus on the monthly payment because he can get you to sign the deal without knowing the real price of the car. Annuity salesmen do the same thing with your life savings!"

Since I have to deal with insurance companies in order to own a home and to drive a car, a cloud of skepticism usually surrounds my relationship with them. My rule has been, "If I don't need them, stay away!"
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 08:58 AM   #55
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Re: Annuities and their role in our investing plan

When it is mentioned that annuities are not insured by anything else but the state guaranty fund, what about sub-accounts in a VUL that are held in mutual funds. Are you saying that those funds would go down with the insurer ?
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 08:59 AM   #56
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Re: Annuities and their role in our investing plan

Quote:
Originally Posted by teejayevans
Are annuities insured?? I lot can happen in 40 years, what happens
if you annuities writer (I assume its like mortgages, and they are
sold and transfered to other holding companies) goes belly up?
Tom
That's definitely something to consider! I hadn't thought of the possibility that they could sell it. Also, you're right - - a lot can happen in 40 years.
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 09:03 AM   #57
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Re: Annuities and their role in our investing plan

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Originally Posted by brewer12345
Not insured. Insurers are required to hold excess capital as a cushion and are reasonably tightly regulated, but if they blow up, the only thing backing policyholders is the insurers' remaining assets and state-by-state guaranty funds, which are generally lightly funded and not backed by anyone.
Yes, there is risk involved with even the big insurers. The interesting thing in all of this is the perception that an annuity company like AIG or MetLife is somehow riskier than having your money in a Vanguard mutual fund. I think the REAL question is: Can the insurer live up to their "guarantees"............and I think we could ask the same thing of Social Security........are they going to live up to their "guarantees"...........in some ways I feel more comfortable with Pacific Life than the Treasury...........
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 09:17 AM   #58
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Re: Annuities and their role in our investing plan

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Originally Posted by Empty Pockets
When it is mentioned that annuities are not insured by anything else but the state guaranty fund, what about sub-accounts in a VUL that are held in mutual funds. Are you saying that those funds would go down with the insurer ?
Depends on what you are talking about. The actual variable account assets that are in mutual funds would be exempt from other claims on an insurer, at least AFAIK. So your invested assets whould be OK. But any other guarantees the insurer made would be jeopardy.
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 09:24 AM   #59
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Re: Annuities and their role in our investing plan

Quote:
Originally Posted by sgeeeee
Okay. Most of you are full of sh#t. CFB ended two of the options with the qualifier, "if it made sense." (choices #2 and #3) Yet very few of you selected #3. So . . . what you are saying is that you would not do something that made sense.

That makes no sense. Now, you may believe that #3 will never make sense, but that wasn't the option.
Well I voted for two, not three. Both options say "if the numbers make sense." There is more to a choice than numbers. I would never put all my money into an annuity product even if the numbers looked good because of the risk that something goes bad with the insurance company or something else bad happening that would make it a poor investment. A diversification issue. So the numbers can make sense but the investment still not make sense.
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 09:35 AM   #60
 
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Re: Annuities and their role in our investing plan

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Originally Posted by OkieTexan
2. Income security - You basically trade a piece of your nest egg for a guaranteed monthly payment. The insurance company is risking that you will live long enough to erase their profit from the annuity. So, if you live to be 100, it might be a good deal. If you die at 70, well...........maybe it won't be.
Well, if you are not interested in leaving an estate when you die, consider this:

If you were getting a monthly payment from an annuity that was greater than the SWR you were taking at age 70, and you died at age 75: Which withdrawal method gave you the most money to spend from ages 70 to 75?
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