Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Old 06-05-2014, 06:39 PM   #141
Recycles dryer sheets
 
Join Date: Feb 2013
Location: Makakilo and Reno
Posts: 374
I've always thought of variable annuities as being "neither fish nor foul". They are complex and are usually expensive


Sigh.......only if you buy from a sales person......no more complex than owing a mutual fund...
Kimo is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 06-05-2014, 06:51 PM   #142
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Mar 2003
Posts: 18,085
Quote:
Originally Posted by Kimo View Post
I've always thought of variable annuities as being "neither fish nor foul". They are complex and are usually expensive


Sigh.......only if you buy from a sales person......no more complex than owing a mutual fund...
Oh, no, they are foul all right - no matter who you buy from.

Go back and read carefully through your paperwork. I would be extremely surprised (to put it mildly) if you were not paying M&E fees.
__________________
"All animals are equal, but some animals are more equal than others."

- George Orwell

Ezekiel 23:20
brewer12345 is offline   Reply With Quote
Old 06-05-2014, 06:53 PM   #143
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,003
Quote:
Originally Posted by Kimo View Post
.....no more complex than owing a mutual fund...
We must be reading different prospectuses. The variable annuities I've looked at had at least 75 pages of 'fine print", usually 100 or more - regardless of who sold them.
__________________
Numbers is hard
REWahoo is offline   Reply With Quote
Old 06-05-2014, 06:58 PM   #144
Recycles dryer sheets
 
Join Date: Feb 2013
Location: Makakilo and Reno
Posts: 374
I have owned 3 of these for 2 years, I know exactly what I pay, scroll up and you will see....the application as I remember it was about 6 pages of which 3 or 4 didn't apply to me...They work for me and they don't for you....kind of like mutual funds, if we all liked the same funds maybe there would be 3 instead of about 7000 of them....
Kimo is offline   Reply With Quote
Old 06-05-2014, 07:01 PM   #145
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Mar 2003
Posts: 18,085
Quote:
Originally Posted by Kimo View Post
I have owned 3 of these for 2 years, I know exactly what I pay, scroll up and you will see....the application as I remember it was about 6 pages of which 3 or 4 didn't apply to me...They work for me and they don't for you....kind of like mutual funds, if we all liked the same funds maybe there would be 3 instead of about 7000 of them....
Whatever works for you. Personally, I am looking forward to the start of small game season. Just ordered a new 20 gauge semi-auto...
__________________
"All animals are equal, but some animals are more equal than others."

- George Orwell

Ezekiel 23:20
brewer12345 is offline   Reply With Quote
Old 06-05-2014, 07:03 PM   #146
Recycles dryer sheets
 
Join Date: Feb 2013
Location: Makakilo and Reno
Posts: 374
Cool.......I am looking forward to the Hot August Nights collector car event in Reno!!!!! My latest restoration will be done!!!!
Kimo is offline   Reply With Quote
Old 06-05-2014, 07:25 PM   #147
Recycles dryer sheets
 
Join Date: Feb 2013
Location: Makakilo and Reno
Posts: 374
FYI...you want complex!!! Try registering a collector car that is in Nevada when you live in Hawaii. All I want to do is give them money so I can have a license plate on the car that is there. This is far more complicated than the annuities I bought and it is taking 10 times as long, or longer....Jeezzz!!!! And here I thought States were looking for ways to tax individuals so they could get more money...
Kimo is offline   Reply With Quote
Old 06-06-2014, 06:46 AM   #148
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,872
Quote:
Originally Posted by Kimo View Post

Sigh.......only if you buy from a sales person......no more complex than owing a mutual fund...
Variable annuities are certainly more complex and expensive than owning a mutual fund. The Vanguard annuity may well work well for you, but my approach would be to keep expenses to a minimum and if I wanted guaranteed income I would use CDs, SS, DB plans and SPIAs before looking at a variable annuity.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 75% Equity Funds / 15% Bonds / 5% Stable Value /2% Cash / 3% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 06-06-2014, 07:00 AM   #149
Thinks s/he gets paid by the post
 
Join Date: Aug 2005
Location: Crownsville
Posts: 3,709
I'm a bit nervous...got a phone call from my uncle the other day, telling me he wants me to look at some annuity papers for my grandmother that are supposed to arrive today. Grandmom is 90, legally blind, and not in a position to manage this kind of stuff anymore, so normally my Mom handles her finances, but she's in Florida for a couple weeks. My uncle knows nothing about finance...in fact, I manage his retirements for him! He looks at me as some sort of financial guru, which kinda scares me a bit.

I really don't know much about my Grandmother's finances, other than a rough idea of what it's all worth, and that it's mostly in bank CDs and other low-interest, conservative accounts. So I didn't even know Grandmom had an annuity.

So, I have no idea what to expect. Hopefully this isn't some decision that needs to be made right away, so I can pawn it off on Mom when she comes back!
Andre1969 is online now   Reply With Quote
Old 06-06-2014, 08:24 AM   #150
Dryer sheet aficionado
 
Join Date: Feb 2011
Location: Colorado mountains
Posts: 31
Hey Kimo, I have an identical investment through Great West life. I hate the .9% fee, but love the "floor" it puts under my mutual fund investment. Mine is in a pre tax account

My fund guarantees a 3.75% withdrawal will be available from the fund for the longer of my or my wifes life span. The investment is in a balanced fund, and the 3.75% is based on the balance at the time I start taking withdrawals (base) . Every year on the anniversary date the base that the 3.75% is calculated against is reset to the current balance in the fund, if the balance has grown. If the balance has not grown, the base stays at the original level, so the withdrawal amount will never go down.

Best case the fund performs well enough to overcome the 3.75% withdrawal and .9 % fee. (plus mutual fund fees also). In this case the balance grows and the amount that I can withdraw grows also. Of course in this case, the 1% fee is wasted because I did not need the guarantee.

Worse case, the fund does not perform well and gets eaten up by the withdrawals and fees. Then you still are guaranteed a withdrawal amount at least as large as the original one. (unless the company goes belly up)

The fund balance is mine to do with as I please, I can get out of the program at any time and move the money to a different investment, and take a chunk out for a special need (which decreases my base) Also the balance passes on to heirs if my wife and I get run over by a beer truck tomorrow.

Not for everybody, but I like it
pinejake is offline   Reply With Quote
Old 06-06-2014, 08:41 AM   #151
Recycles dryer sheets
 
Join Date: Feb 2013
Location: Makakilo and Reno
Posts: 374
Quote:
Originally Posted by pinejake View Post
Hey Kimo, I have an identical investment through Great West life. I hate the .9% fee, but love the "floor" it puts under my mutual fund investment. Mine is in a pre tax account

My fund guarantees a 3.75% withdrawal will be available from the fund for the longer of my or my wifes life span. The investment is in a balanced fund, and the 3.75% is based on the balance at the time I start taking withdrawals (base) . Every year on the anniversary date the base that the 3.75% is calculated against is reset to the current balance in the fund, if the balance has grown. If the balance has not grown, the base stays at the original level, so the withdrawal amount will never go down.

Best case the fund performs well enough to overcome the 3.75% withdrawal and .9 % fee. (plus mutual fund fees also). In this case the balance grows and the amount that I can withdraw grows also. Of course in this case, the 1% fee is wasted because I did not need the guarantee.

Worse case, the fund does not perform well and gets eaten up by the withdrawals and fees. Then you still are guaranteed a withdrawal amount at least as large as the original one. (unless the company goes belly up)

The fund balance is mine to do with as I please, I can get out of the program at any time and move the money to a different investment, and take a chunk out for a special need (which decreases my base) Also the balance passes on to heirs if my wife and I get run over by a beer truck tomorrow.

Not for everybody, but I like it
Pinejake, I agree, there are people who hate them but I would never give mine up. I hold a lot of different investments in my portfolio and this is the one I worry about the least......good for you!!!
Kimo is offline   Reply With Quote
Old 06-06-2014, 09:12 AM   #152
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,872
Quote:
Originally Posted by pinejake View Post
Hey Kimo, I have an identical investment through Great West life. I hate the .9% fee, but love the "floor" it puts under my mutual fund investment. Mine is in a pre tax account

My fund guarantees a 3.75% withdrawal will be available from the fund for the longer of my or my wifes life span. The investment is in a balanced fund, and the 3.75% is based on the balance at the time I start taking withdrawals (base) . Every year on the anniversary date the base that the 3.75% is calculated against is reset to the current balance in the fund, if the balance has grown. If the balance has not grown, the base stays at the original level, so the withdrawal amount will never go down.

Best case the fund performs well enough to overcome the 3.75% withdrawal and .9 % fee. (plus mutual fund fees also). In this case the balance grows and the amount that I can withdraw grows also. Of course in this case, the 1% fee is wasted because I did not need the guarantee.

Worse case, the fund does not perform well and gets eaten up by the withdrawals and fees. Then you still are guaranteed a withdrawal amount at least as large as the original one. (unless the company goes belly up)

The fund balance is mine to do with as I please, I can get out of the program at any time and move the money to a different investment, and take a chunk out for a special need (which decreases my base) Also the balance passes on to heirs if my wife and I get run over by a beer truck tomorrow.

Not for everybody, but I like it
TIAA-Traditional is an interesting product. It guarantees a minimum return of 3%, there are no fees that the investor sees, they are baked into the annual interest rate. Each year an additional rate is declared and this year it's 1.74% so I'm getting 4.74%. I can also get at principal by making a series of equal withdrawals over 10 years. Alternatively I could buy a fixed annuity through TIAA-CREF and get a 7% payout rate. It's an interesting choice between an SPIA with it's lower costs and higher payout rate and a variable annuity with an income rider that will initially pay out less and have higher fees. Your gambling on a rising market......which sort of negates the reason I'd have for buying an annuity. Of course you have to account for inflation which is the simple SPIA's big drawback.

For people who ER a fixed term SPIA might be a good choice to bridge the gap to SS or 59.5. I considered one to fund the years between 52.5 and 59.5, but I ended up just putting money into a Stable Value fund in my Great Life 457 that returns 2.6%. I increased the equity percentage in my AA. I get some interest and lots of flexibility.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 75% Equity Funds / 15% Bonds / 5% Stable Value /2% Cash / 3% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 06-06-2014, 10:24 AM   #153
Recycles dryer sheets
 
Join Date: Feb 2013
Location: Makakilo and Reno
Posts: 374
I have always thought of this forum as a way to possibly explain personal experiences so that others can entertain the though as to whether it may or may not be something they are interested in.

There appears to be some very misguided information regarding annuities that are actively searched for as I did as opposed to a salesperson calling you at dinner to sell something he is going to make a lot of money on.

I would like to offer a comparison between the actual annuity I bought vs. an actual mutual fund I bought. Because this is my true experience I can't vouch for other products but because both are Vanguard products I believe a lot of people will be able to follow this because of their familiarity with Vanguard.

I decide on June 1, 2012 to buy Wellington Fund and a variable annuity that's only holding is the same Wellington Fund. I enter the order for 100,000.00 dollars each. The next morning I awake to find x number of shares in both holdings each valued at 100,000.00. I hold both of these in my Vanguard account, side by side.

I decide I want to take out 4.5% of my MF so that it coincides with the 4.5% I am having taken out of my annuity.

There are three ways the market can preform, up down or stay the same, lets look at each scenario.

Over the next 10 years the market, on average, continues to rise. I continue to sell shares from the MF to keep my return the same as my annuity payout and in addition to selling shares in my annuity to keep the same return I am also selling shares to cover the .95% fee in the annuity. So, after 10 years I have less in my annuity that in my MF. I also have a lot more money in my other mutual funds because of the rise in the market. At this point, if I wish, I can close my annuity at no cost and collect the entire balance because I have determined I now have more money than life left. While I did lose the .95% I don't mind as I will be gone prior to running out of money. (Remember I kept raising the withdrawal in dollar amount to keep it a steady 4.5% withdrawal rate for the 10 years in both accounts.

Now lets consider the other 2 scenarios. If the market stays flat or declines for the next 10 years as I continue to take my 4.5% out of both accounts there is a real possibility I run both accounts to zero, with the annuity getting there first because of the additional money taken out for the fee. So eventually, I have 2 accounts with no money in them. This is not an end of the world scenario, it is a fund that can't keep up with the 4.5% withdrawal rate.The MF account is closed because obviously I can't continue to take my 4.5% from it. On the other hand, I continue to receive my 4.5 percent from my annuity and, as an added benefit, they stop charging me the fee (That is in the contract). So, for the rest of my life I get this 4.5% vs. nothing from the MF.

This is why I personally can relate buying this particular annuity as the same as buying a mutual fund.

FYI, I receive all dividends, capital gains, etc. in both accounts. Both are held in taxable accounts so I pay the same taxes on both.

Where is the problem?
Kimo is offline   Reply With Quote
Old 06-06-2014, 10:29 AM   #154
Thinks s/he gets paid by the post
RetireAge50's Avatar
 
Join Date: Aug 2013
Posts: 1,660
Who gets all the money at your death?
RetireAge50 is offline   Reply With Quote
Old 06-06-2014, 10:31 AM   #155
Recycles dryer sheets
 
Join Date: Feb 2013
Location: Makakilo and Reno
Posts: 374
My wife gets everything, exactly what ever is the balance, it transfers to her Vanguard account with no fee.
Kimo is offline   Reply With Quote
Old 06-06-2014, 10:36 AM   #156
Thinks s/he gets paid by the post
RetireAge50's Avatar
 
Join Date: Aug 2013
Posts: 1,660
Ok so that is not the problem. Maybe it is you are not out surfing right now!
RetireAge50 is offline   Reply With Quote
Old 06-06-2014, 10:38 AM   #157
Recycles dryer sheets
 
Join Date: Feb 2013
Location: Makakilo and Reno
Posts: 374
On my way to the North Shore to meet friends in 2 hours!!!! It is only 6:31 AM as I write this! And so, you are right!!!!!!!!!!!!
Kimo is offline   Reply With Quote
Old 06-06-2014, 10:47 AM   #158
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Mar 2003
Posts: 18,085
Quote:
Originally Posted by Kimo View Post
Where is the problem?
It is your money, so apparently it is not a problem for you.

For me, the problem is that it is effectively a mutual fund with a 1+% expense ratio, a guarantee that is useless, and worse tax treatment than simply holding a mutual fund in a taxable account. But since it is not my money, I don't much care if you think this is a great proposition.
__________________
"All animals are equal, but some animals are more equal than others."

- George Orwell

Ezekiel 23:20
brewer12345 is offline   Reply With Quote
Old 06-06-2014, 10:54 AM   #159
Recycles dryer sheets
 
Join Date: Feb 2013
Location: Makakilo and Reno
Posts: 374
This is a small portion of my total portfolio. If the worst happens I add my return from the annuity with my SS and I will always have enough to eat something beside Alpo. If the best happens I don't care what extra I paid, I will have so much money in my other accounts I won't be able to spend it all....
Kimo is offline   Reply With Quote
Old 06-06-2014, 10:56 AM   #160
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Mar 2003
Posts: 18,085
Quote:
Originally Posted by Kimo View Post
This is a small portion of my total portfolio. If the worst happens I add my return from the annuity with my SS and I will always have enough to eat something beside Alpo. If the best happens I don't care what extra I paid, I will have so much money in my other accounts I won't be able to spend it all....
So you drink enough Kool Aid that your blood type is "punch?"
__________________
"All animals are equal, but some animals are more equal than others."

- George Orwell

Ezekiel 23:20
brewer12345 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Why Don't Retirees Buy Annuities? They Get Something Most Economists Don't Tree-dweller FIRE and Money 101 12-05-2013 01:22 PM
At least someone is doing something UncleHoney FIRE and Money 12 11-22-2012 06:49 PM
Now you know something the Main Stream Media doesn't want you to. barbarus FIRE and Money 1 08-19-2008 05:36 PM
Your kids may not be talking to you, but... Nords Other topics 7 04-06-2005 10:56 AM

» Quick Links

 
All times are GMT -6. The time now is 05:41 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.