Annuity has gained NOTHING....help! (long)

[mathjak107]

what prudential did is come out with a variable annuity that is really a fixed annuity but it looks good on paper.

it is a variable annuity with only one option , a bond index .


the shrewd part is they tell you for every year you delay taking withdrawals the income base amount will grow by 5.50% .

but that amount can only be used as a basis for income and not surrender or account value.

you gain a 1/10% increase in withdrawal rate for every year older you get which means although they credit the income base at 5.50% you only get to draw 1/10% of that a year as income.


it really sounds a lot better than it is,.


then depending on your age you get a guaranteed withdrawal rate as a min .

assuming age 85 or so that could get you a 3.50% return . the bond index acts as a sub account and if it goes up your income goes up , as they say.

but the expenses run almost 3% and at best bonds averaged 5.25% the last 30 years so there is noooooooo way ever the bond portion will beat the guaranteed amount . so while a good selling point the reality is no way will you ever beat the income amount and get a boost from the bonds .

 

[mathjak107]

here are some real wotld work ups on the prudential annuity the broker will never show you .

these were done by annuity gator.


the first thing you see is the money growing at that 5.50% growth rate really has little effect unless you start way way early.

sales literature advertising the growth rate

actual withdrawal amounts at various ages.

as you see the median range of return will likely be in the low 3% range for most foolks based on life expectancy.

but even if you live to 95 you still can't get above 4.50% , never ever matching the 5,.50% growth rate.


the bond component index will offer little help to getting any more as you would need to first beat the guarranteed rate . not easy to do when expenses are almost 3% and even when rates were higher bonds averaged 5.25%

what i will say is while it isn't a great deal it certainly can be a good deal replacing some or maybe even all cash and bonds in your own portfolio.

to match that cah flow would require more selling of equities for quite a while if you were going to draw principal and interest today from cash to live.

that is where the real advantage is. that cash on your own would be gone after a number of years and now equities liquidated to make up the short fall .

using something like this has the advantage too of having an income base for life so less equities need to be sold to generate more cash flow