Annuity with a guaranteed 8% annual return

[easysurfer]

On the guaranteed 8% annual gain, as the saying goes, if it sounds to good to be true, it usually is.

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Been reading about the Vanguard Annuity Access service. A detailed discussion of it at Bogleheads if you want to read it.

Bogleheads :: View topic - New Vanguard/"Income Solutions" income annuity pro

 

[FinanceDude]

They sure love them SPIAS on Boglehead forum. Somone needs to tell them NOW is not a really good time to lock in a SPIA..........

 

[Stevewc]

They sure love them SPIAS on Boglehead forum. Somone needs to tell them NOW is not a really good time to lock in a SPIA..........

Actually this has been mentioned (at bogleheads) on several occasions, due to current low interest rates.
Steve

 

[dgoldenz]

Actually this has been mentioned on several occasions, due to low interest rates.
Steve

Companies are still paying interest? I thought we were paying them now.

 

[brewer12345]

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?

Its a sleazy product being sold by a sleazy agent. Product and scumball aside, F&G (Effin' Gee) is a shaky company owned by an increasingly wobbly South African conglomerate. Even if I loved the product (I don't), I would buy it from a different insurer.

 

[perrytime]

maybe

I think I was carefull, 1 1/2 years ago got an allianze master dex annuity, I read everything carefully, and so far am happy. Got the bonus $, saw the growth on enhanced value. it seems to be doing what it claims. the return based on indexes, monthly method, got hammered by one bad month, which i knew could happen. zero gain in any given year is possible. Yes if you cash out early, you loose a lot, the reall test will be in 10 years, when i plan to opt for the 10 yr payout, not the lifetime. what Will the return be during the 10 yr payout. In short, i think a pecentage in one of these is okay, given no pension.

 

[REWahoo]

This may provide a hint as to what Dex is up to with his "I'm going all cash but I'm not timing the market" strategy.

I think I was carefull, 1 1/2 years ago got an allianze master dex annuity...

If he's sold enough of these his commissions may have grown large enough that an all cash nest egg will work for the long haul. Hard to argue with that strategy.

 

[obgyn65]

Thanks for sharing FinanceDude.

OK:

1)What is the TOTAL EXPENSE of this annuity, inluding M&E AND management expenses?

2)You said the RETURN was guaranteed........that means I can WALK AWAY with my guaranteed return, right?

3)How long do I have to hold this annuity? Is there a NO SURRENDER option? (Most VAs have a NO SURRENDER option, but most agents don't mention that because they get paid 80% less up front on those share classes.

4)How are YOU compensated on this sale?

5)Why is this better for me than a traditional balanced portfolio of low cost mutual funds?

6)Show me in the prospectus where the CDSC schedule is located.

7)Give me a prospectus to look over, if I'm still interested after reviewing that I will be sure to call you. Don't contact me, I'll contact you........

There's more, but that's a start.........

 

[Retirement Mechanic]

There is so much bitter and misleading information about annuities in general and the annuity you are questioning in particular.

1.: The company guarantees 8% on what is referred to as an income value. If your intent is to receive guaranteed lifetime income, whether now or down the road, then this option is hard to beat. You will recieve 8% guaranteed during your years of deferral. Once income is initiated, the 8% is replaced by lifetime guaranteed income. This 8% value is used only for the purpose of determining maximum lifetime income and is not available as a walk away value. When you are in your 60's, guarantees trump the confusing management of equities and bonds.

2: Re asking for the prospectus: There is no prospectus with fixed index annuities, the type in question here. There is a statement of disclosure. The disclosure statement is roughly 12 pages in length. A typical prospectus, required with every mutual fund purchased, is typically 120 pages in length.

The annuity continually gets a bad rap from Wall St. and the media and others parrot the talk without knowing basis for what they say. The indexed annuity has averaged 5.5% over the last ten years vs. a virtual flat growth period for the DOW.

Don't run from the annuity, it may be the one true lifeline you have for retirement.

 

[Retirement Mechanic]

My friend, please take a course in annuities before becoming the authority. The annuity in question is not a variable annuity, as such, there are no M&E and Management charges.

There is a charge for the 8% income rider. The expense is .9% annually, deducted from the account value side, not the income value side.

The annuity is a contract with a 10 year decreasing surrender charge, much like a back end charge on a B share mutual fund. If retirement income is the objective, then guaranteed lifetime income can be initiated anytime after the 1st year.

The low cost mutual funds are typically self managed, thus the low cost. The difference is the guaranteed income, guaranteed asset preservation, and the benefit of no personal management of the annuity vs. having the ability to 'play' the markets. Give me guarantees in my retirement, not over hyped market projections of a market rebound.

As for compensation, the commission rate is typically a one time, up front, 4% to 8%, depending upon the annuity recommended. The fee does not come pout of the funds being invested. When you consider the equities broker receives a 1 to 1.5% annual fee every year, coming from the investors account, then the upfront commission is balanced.

The annuity is a long term planning strategy for the individual that seeks the security of guarantees vs. the risk of the stock market. Looking back over the last ten years, I bet there are many who wished they had those annuity guarantees in place 10 year ago.

Are there bad agents out there pushing the wrong annuity for the wrong reason? You betcha. There are bad agents in every industry - insurance, Wall St., Banking, medical, transportation, you name it. I just get more than a little frustrated when someone who lacks the knowledge become the authority.

 

[Retirement Mechanic]

I am very familiar with the Allianz Master Dex product. The answer to your concern regarding your 10 year payout: 100% of your account value will simply be devided by 10 and evenly distributed to you over the ten year period.

As you know, your original premium amount plus all future credited gains are protected against any and all future market downturns. Congratualtions on making a wise decision.

 

[MichaelB]

Hello there Retirement Mechanic. Drumming up a little business?

 

[Ed_The_Gypsy]

If the OP is still reading, in my humble opinion, a guaranteed 8% today is fantasy. Warren Buffet said a while back that he expected no more than 6% returns on investment (OK, it was a few years ago). The company will go broke trying to produce, and if they are offering 8%, they expect to bail on you. It is like buying Confederate money.

 

[ziggy29]

If the OP is still reading, in my humble opinion, a guaranteed 8% today is fantasy. Warren Buffet said a while back that he expected no more than 6% returns on investment (OK, it was a few years ago). The company will go broke trying to produce, and if they are offering 8%, they expect to bail on you. It is like buying Confederate money.

I think a guaranteed 5% is fantasy. Hell, I think a "guaranteed" break-even after real inflation ("real" as in "not the sugar-coated CPI) and taxes is not likely for "new money" these days.

 

[REWahoo]

Hello there Retirement Mechanic. Drumming up a little business?

Why would you think that? After all, the thread he decided to sign up and respond to has only been dead for 10 months...

 

[Ed_The_Gypsy]

I fear you are right, zig. 6% would make me really happy. I am not counting on it.

 

[FinanceDude]

My friend, please take a course in annuities before becoming the authority. The annuity in question is not a variable annuity, as such, there are no M&E and Management charges.

Oh yeah, I forgot, 10 year surrender charges, even VAs don't go past 8 or 9, my bad.........

There is a charge for the 8% income rider. The expense is .9% annually, deducted from the account value side, not the income value side.

How is this news, and "unique"?

The annuity is a contract with a 10 year decreasing surrender charge, much like a back end charge on a B share mutual fund. If retirement income is the objective, then guaranteed lifetime income can be initiated anytime after the 1st year.

There are other LESS expensive ways to do that. Ever hear of a SPIA?

The low cost mutual funds are typically self managed, thus the low cost. The difference is the guaranteed income, guaranteed asset preservation, and the benefit of no personal management of the annuity vs. having the ability to 'play' the markets. Give me guarantees in my retirement, not over hyped market projections of a market rebound.

Low cost mutual funds? Now you are just amusing.......

As for compensation, the commission rate is typically a one time, up front, 4% to 8%, depending upon the annuity recommended. The fee does not come pout of the funds being invested. When you consider the equities broker receives a 1 to 1.5% annual fee every year, coming from the investors account, then the upfront commission is balanced.

When you get your Series 7 and can talk intelligently, feel free to comment. Until then, you are just an insurance guy selling EIAs which should be regulated by FINRA, and will be soon.........

I just get more than a little frustrated when someone who lacks the knowledge become the authority.

Glad to know we have such experts on a board full of millionaires that are self-made. And most of them did it without buying EIAs..........

 

[REWahoo]

I just get more than a little frustrated when someone who lacks the knowledge become the authority.

And you'll find similar frustration from many E-R forum members when an annuity [-]salesman[/-] authority shows up to "help" the lumpen masses gathered here gain knowledge about the unjustly maligned "investment" known as an annuity.

 

[ziggy29]

And you'll find similar frustration from many E-R forum members when an annuity [-]salesman[/-] authority shows up to "help" the lumpen masses gathered here gain knowledge about the unjustly maligned "investment" known as an annuity.

Hey, we residents of the "lumpen slums" need all the help we can get, or so we're told...

 

[M Paquette]

And you'll find similar frustration from many E-R forum members when an annuity [-]salesman[/-] authority shows up to "help" the lumpen masses gathered here gain knowledge about the unjustly maligned "investment" known as an annuity.

Indeed. Just when it looks safe to set forth and sail the wide accountancy, those stalwart and reasonably trustworthy men of the Crimson Permanent Assurance show up!

The Crimson Permanent Assurance

 

[Retirement Mechanic]

Hello there MB. Nope, I'm a local guy. Just trying to set the record straight when it comes to annuities. A great strategy when properly used.

Thanks

 

[FinanceDude]

Hello there MB. Nope, I'm a local guy. Just trying to set the record straight when it comes to annuities. A great strategy when properly used.

Thanks

You mean, properly sold, right?

 

[Retirement Mechanic]

Oh, 'sold' is a four letter word, is that the implication? Maybe like in selling autos? real estate? mutual funds? There are those in this industry, as in any industry, that will take unfair advantage of the consumer and there are the vast majority who do the right thing for the consumer. The many clients who I have 'sold' annuities to over the last 15 years are very satisfied with their decision to 'buy' the anuity, especially when they look back at the markets. If they had listened to the annuity nay-sayers back then their retirement would still be underwater.

 

[ziggy29]

Hello there MB. Nope, I'm a local guy. Just trying to set the record straight when it comes to annuities. A great strategy when properly used.

I have no issue with someone using *part* of their retirement savings to "buy a pension" with an SPIA (but not now because rates are so terrible). But when you start selling complicated, "guaranteed" deferred annuity products, I run the other way.

 

[REWahoo]

Oh, 'sold' is a four letter word, is that the implication?

When associated with women or annuities, yes.