Annuity with a guaranteed 8% annual return

[FinanceDude]

73ss454
I looked at the "takemymoney" URL and used its search to look for a 10% rollup. I could not find anything close. Can you give the precise URL listing where it talks about that? Much thanks.

And yes, a 10% fixed under performs an 8% compounded rollup in about 3.5 years. It was not the 10% I was looking for, just the company that offered it. At 8% compounded, you can double your money in 10 years. My problem is that I will not have that long before I need to take the annual withdrawal from the annuity.
tjcooper

10% rollup for 10 years is Nationwide, it is 2.5% simple interest per quarter, not compounded. It is an INCOME base growth, not contract value. Other companies like Prudential and Allianz compue things differently..........

 

[dgoldenz]

10% rollup for 10 years is Nationwide, it is 2.5% simple interest per quarter, not compounded. It is an INCOME base growth, not contract value. Other companies like Prudential and Allianz compue things differently..........

A company with a 20-30% income account bonus would do better than 10% annual simple or 2.5% quarterly simple if he intends to take income within the first few years. An agent should be able to find him the highest guaranteed payout based on his parameters. Too many variables to just figure on one company being the best.

 

[tjcooper]

timeframes

dgoldenz and others,
thanks for the info. I just wanted the Nationwide name to satisfy a "senior moment" because I had seen it and could not remember who had offered it.

I have spent a great deal of time getting the BPA12 into Excel form precisely where I can run that last 30 years of S&P500 thru it restarting it at various starting points to see how the Accumulation and Income Values do for averages, standard deviations, and mode. I am 64, want to work until I am 70 but with the job market, who knows. So I may need distributions in 2 years or 8 years depending on the job market. With the Free 10% withdrawal, I could probably make 10 years before guarenteed withdrawals start. The fact that BPA12 pays interest until the day of Free Withdrawal on that amount, makes a huge difference it the AV and IV if I put off as long as possible taking guarenteed withdrawal.

I have looked at MasterDex 5, MidLand equivalent, and several others. When you model the program and play real honest data through it based on various 10 year shots of the S&P500, there are huge differences in the outcomes. The interesting thing about the BPA12 is the no fees if no gain policy. It is very expensive in good years, yes. But in good years, you can do 12% to 25% and then trigger a Lock-In. In bad years, you gain nothing but pay nothing. That does not seem to match the other annunities.

dgoldenz, what is your real life experience tracking your customer's performance of various plans in the last 10 years? I am looking for an honest appraisal, not a sales pitch. From all the comments you have posted here, I think you are the kind of guy who will do the honest appraisal.
tjcooper

 

[dgoldenz]

dgoldenz and others,
thanks for the info. I just wanted the Nationwide name to satisfy a "senior moment" because I had seen it and could not remember who had offered it.

I have spent a great deal of time getting the BPA12 into Excel form precisely where I can run that last 30 years of S&P500 thru it restarting it at various starting points to see how the Accumulation and Income Values do for averages, standard deviations, and mode. I am 64, want to work until I am 70 but with the job market, who knows. So I may need distributions in 2 years or 8 years depending on the job market. With the Free 10% withdrawal, I could probably make 10 years before guarenteed withdrawals start. The fact that BPA12 pays interest until the day of Free Withdrawal on that amount, makes a huge difference it the AV and IV if I put off as long as possible taking guarenteed withdrawal.

I have looked at MasterDex 5, MidLand equivalent, and several others. When you model the program and play real honest data through it based on various 10 year shots of the S&P500, there are huge differences in the outcomes. The interesting thing about the BPA12 is the no fees if no gain policy. It is very expensive in good years, yes. But in good years, you can do 12% to 25% and then trigger a Lock-In. In bad years, you gain nothing but pay nothing. That does not seem to match the other annunities.

dgoldenz, what is your real life experience tracking your customer's performance of various plans in the last 10 years? I am looking for an honest appraisal, not a sales pitch. From all the comments you have posted here, I think you are the kind of guy who will do the honest appraisal.
tjcooper

Indexed annuities are a fairly new product, so there isn't really 10 years worth of tracking here. Caps on interest rates are also a lot lower now than they were 3-4 years ago, so that would make a substantial difference in overall performance. Of the clients we have done indexed annuities for, all of them have been very satisfied with them and no complaints. Those who bought a few years ago with 8-12% cap rates got the best deals. Now the cap rates are 3-6.5% for the most part and less attractive on an accumulation standpoint.

Seems like most people looking at indexed annuities right now are looking for products with the guaranteed income. Never been a fan of Allianz products, they are very confusing and the contract is like 160 pages, way longer than an indexed annuity contract should be. We did one with an income rider for a client with RBC last year and the contract was about 40 pages and easily readable for your average consumer.

Every annuity has some good and bad, you just have to be able to live with the bad in exchange for finding the good. Annuities with better guarantees or bonuses often have higher surrender charges or longer surrender periods. Annuities with shorter surrender periods have lower caps. Some have MVA's, some do not.

You should also make sure you're aware that taking money from the 10% free withdrawal also reduces your income account base, lowering your guaranteed payout whenever you start. If you are really looking for 6-10 years out, there are other annuities that might do better for you on a guaranteed basis. Really comes down to whether you want to trade off some of the guaranteed income for a product with higher cap rates or fixed interest rates. All of the caps/fixed rates are pretty low right now though.

 

[brewer12345]

A good resource and a reasonably objective one on equity indexed annuities (which are filth, IMO) can ba found here: Library

 

[dgoldenz]

A good resource and a reasonably objective one on equity indexed annuities (which are filth, IMO) can ba found here: Library

Most of those articles are so old that they really don't have any bearing on what's out there today. The indexed annuity market has changed a lot in the last two years.

 

[FinanceDude]

A company with a 20-30% income account bonus would do better than 10% annual simple or 2.5% quarterly simple if he intends to take income within the first few years. An agent should be able to find him the highest guaranteed payout based on his parameters. Too many variables to just figure on one company being the best.

I was just answering his question, not advising him..........

 

[FinanceDude]

Most of those articles are so old that they really don't have any bearing on what's out there today. The indexed annuity market has changed a lot in the last two years.

Ay with NO surrender charges?

 

[dgoldenz]

Ay with NO surrender charges?

Sun Life had one about a year ago that was about 90% liquid after the first year with no surrender charge penalty, but they stopped selling it. Was a great product for those concerned about liquidity....other than that, none that I can think of without a surrender charge. Even straight fixed annuities have a surrender charge schedule.

 

[rgarling]

...
I wonder how Vanguard is doing with those guaranteed payout funds they were touting a few years ago.

I'm not sure, but I think you are referring to their Managed Payout Funds, where the payout is based on a percentage of the account value averaged over the previous 3 years. It hurt Vanguard to the extent that people's expectations were not met due to the market downturn at about the time the funds were released. Together the 3 funds have about 500 million in them.

 

[rothlev]

I am a sucker for anything free. We got a flyer from Fidelity & Guaranty for $100, gift card for attending a free financial consultation. So, I thought it would be interesting to go just to hear the sales pitch. He was selling Allianz MasterDex X annuity. He told me that we could not review the contract until the sale. He said that there were no fees since we would not need any of the riders. It was an equity indexed annuity. He also slammed variable annuities, but said this one ( equity index ) was great. I know from reading this board how awful this product is, but I had a hard time spotting the flaws in his presentation.

 

[FinanceDude]

Yikes..........

 

[REWahoo]

I know from reading this board how awful this product is, but I had a hard time spotting the flaws in his presentation.

Here's a hint:

He told me that we could not review the contract until the sale.

 

[rescueme]

He told me that we could not review the contract until the sale.

Sounds like Nancy ("we can't see what is in the healthcare bill until we vote it in")...

Be afraid, be very afraid.

 

[rothlev]

Be afraid, be very afraid.

I wasn't going to buy anything. I was curious as to the presentation. Could it be true that there weren't any fees? He was also crediting the account with a 10% bonus, that was yours to cash out on in increments over 10 years. We both have pension income, I wanted to know what kind of product he would push. He didn't have any credentials at all , just finanical professional with some series license . One thing that was clear to me was someone could easily buy into this. Is it standard practice to not let you see a contract?

 

[dgoldenz]

I wasn't going to buy anything. I was curious as to the presentation. Could it be true that there weren't any fees? He was also crediting the account with a 10% bonus, that was yours to cash out on in increments over 10 years. We both have pension income, I wanted to know what kind of product he would push. He didn't have any credentials at all , just finanical professional with some series license . One thing that was clear to me was someone could easily buy into this. Is it standard practice to not let you see a contract?

There is a recapture schedule for the 10% bonus, you can't cash it out in increments without losing some of it. If you keep the contract for the full term, you keep the 10% bonus. There are no "fees" taken out of your principle, 100% goes into the contract. The agent does get paid a commission and the insurance company can charge a fee for optional riders that comes out of your principal, but the riders are not required. If you consider the insurance company's potential profit when the market goes up a "fee" then that would be a fee, but that's more of the price you pay for principal protection than what I would call a "fee" since nothing comes out of your principal.

That said, products with income riders are usually designed specifically for people who want to take a lifetime income and buying such a policy without the rider wouldn't make sense. There would likely be other products with higher caps or participation rates if you didn't want the rider.

I would be highly skeptical of anyone that wouldn't show you the actual contract before signing something. He probably doesn't want to show you because the contract could be 100+ pages. Every company has specimen contracts that agents can give to clients. I always give my clients a spec contract if they ask for it, which most do. Shouldn't be an issue, sounds like he's just playing hardball salesmanship...

 

[TeeRuh]

Is it standard practice to not let you see a contract?

Yeah; sort of like when you buy that new car but you can't look under the hood until you've signed all the paperwork ...

t.r.

 

[ronin]

If you want to get warmed up for reading the contract, try wading through this first:

Equity Indexed Annuity Report

 

[dgoldenz]

If you want to get warmed up for reading the contract, try wading through this first:

Equity Indexed Annuity Report

I just read through that and it basically says the person was sold an unsuitable product. If I had a penny for every time someone recommended the wrong product (not just for annuities), I wouldn't need to sell insurance. Of course, everyone knows that there has never been a RR that recommended an unsuitable strategy either. Not saying two wrongs make a right here, just that the pot often calls the kettle black.

I've always found it ironic that RR's chide insurance agents for the commissions on annuities, meanwhile they are pocketing 1% of total portfolio value for 10, 20, 30, 40 years and act like they're doing it for free. High comedy.

 

[Stevewc]

I have not read through this thread so this may already be in here some place. I thought some of you might be interested in this if considering any kind of annuity.

Annuity Industry Gets Name Makeover - CBS MoneyWatch.com

 

[Independent]

I wasn't going to buy anything. I was curious as to the presentation. Could it be true that there weren't any fees?

In my opinion, that's like saying a CD doesn't have any fees. We all know that the bank lends our money to someone at a rate higher than they pay on the CD. The difference covers the bank's expenses and profits, but we never know exactly how much the difference is.

That's different from a mutual fund where the deal is that they pass through the investment results less a stated fee.

So the company's expenses reduce your return with either format, but in one case it's visible and the other it isn't.

 

[M Paquette]

ICould it be true that there weren't any fees?

No fees, just charges, expenses, recapture schedules... Gotta ask the right question. If you don't say the secret word, he won't tell you!

He was also crediting the account with a 10% bonus, that was yours to cash out on in increments over 10 years.

Generous of him. But... TANSTAAFL!

That credit likely gets 'recaptured' if you don't leave everything in the account for the full term. Check the fine print in the contract he won't show to you.

He didn't have any credentials at all , just finanical professional with some series license .

Probably a Series 6 National Association of Securities Dealers (NASD) license, required to sell you funds and certain kinds of annuities. It means his sales manager made him read the study guide one afternoon before the test

One thing that was clear to me was someone could easily buy into this. Is it standard practice to not let you see a contract?

It might be HIS standard practice, but that by itself is a huge red flag, AKA "Run away! Run away!"

 

[73ss454]

"He also slammed variable annuities, but said this one ( equity index ) was great. "

Translation: this product has a higher commission.

 

[FinanceDude]

Probably a Series 6 National Association of Securities Dealers (NASD) license, required to sell you funds and certain kinds of annuities. It means his sales manager made him read the study guide one afternoon before the test

Actually, he doesn't even need a Series 6 to sell an EIA....just an insurance license..........

 

[FinanceDude]

"He also slammed variable annuities, but said this one ( equity index ) was great. "

Translation: this product has a higher commission.

He probably slammed it because he failed the Series 6..........