|
|
Anybody buying variable annuities?
06-11-2012, 04:00 PM
|
#1
|
Dryer sheet wannabe
Join Date: Dec 2004
Posts: 11
|
Anybody buying variable annuities?
I am looking to protect some of my assets in the form of an annuity. Rates for fixed annuities are very low. Any thoughts on VA's- advice and or specific products would be appreciated. Fed up with the roller coaster!!!
|
|
|
|
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!
|
06-11-2012, 04:04 PM
|
#2
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,021
|
You came to the wrong place for recommendations on which variable annuity to purchase. The insurance company and the salesman are the only sure winners on that product.
__________________
Numbers is hard
|
|
|
06-11-2012, 04:16 PM
|
#3
|
Thinks s/he gets paid by the post
Join Date: Oct 2004
Location: LaLa Land
Posts: 4,698
|
I'm staying on the rollercoaster, it's better than the death plunge. The last thing I'll do with my money is give it to an ins company and a VA.
__________________
Work is something you do to get enough $ so you don't have to....Me.
|
|
|
06-11-2012, 04:23 PM
|
#4
|
Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,714
|
Barron's of May 28 covered their "Top 50 annuities". I haven't read the piece but you may find it useful, and you can probably get the issue at your local library.
|
|
|
06-11-2012, 05:57 PM
|
#5
|
Thinks s/he gets paid by the post
Join Date: Mar 2006
Location: Houston
Posts: 4,337
|
The fees will negate any "safety" you might believe you are getting. The annuity itself has a high fee (1-3%), the individual funds have high fees (1-2%) and then you pay for the rider to eliminate the risk of principal loss (~2%). The protection usually also stipulates that you must convert your "safe" principal into a SPIA at a future, yet-to-be-determined rate. Your supposed "safe" investment is really just a giant fee machine for the insurance company.
Go to Scott Burns' website. He had a recent article describing the wonders of variable annuities.
These things are total losers for the purchaser. The annuity salesperson will typically pocket 10%. Of course, the firms also make out big.
I don't know if there is anyone that regularly comes to this forum that will say how happy they are with their purchase. Various people have lamented their purchases and the high cost of escaping the contract. We do, however, regularly have annuity trolls show up saying how wonderful they are.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
|
|
|
06-11-2012, 05:59 PM
|
#6
|
Thinks s/he gets paid by the post
Join Date: Jul 2005
Posts: 4,366
|
VA's are complex and have expensive fees. We're mostly DIY'ers happy to avoid the fees. You might prefer conservative balanced funds or more bonds in your portfolio. Watch your portfolio total, not the individual pieces. They all work together.
|
|
|
06-11-2012, 06:03 PM
|
#7
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2008
Location: NC
Posts: 21,303
|
I'd never buy one, but FWIW Pros and cons of variable annuities - CSMonitor.com
I don't plan to ever buy any annuity, but I certainly wouldn't rule out a SPIA (or actually several to spread around insurer default risk) one day under certain circumstances as part of our "plan B."
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
|
|
|
06-11-2012, 06:03 PM
|
#8
|
Moderator Emeritus
Join Date: Dec 2002
Location: Oahu
Posts: 26,860
|
Quote:
Originally Posted by at_last
I am looking to protect some of my assets in the form of an annuity. Rates for fixed annuities are very low. Any thoughts on VA's- advice and or specific products would be appreciated. Fed up with the roller coaster!!!
|
You know that question you asked nearly eight years ago about equity indexed annuities?
EIAs and VAs still suck.
__________________
*
Co-author (with my daughter) of “Raising Your Money-Savvy Family For Next Generation Financial Independence.”
Author of the book written on E-R.org: "The Military Guide to Financial Independence and Retirement."
I don't spend much time here— please send a PM.
|
|
|
Thanks for the loving smack across my head
06-11-2012, 06:07 PM
|
#9
|
Dryer sheet wannabe
Join Date: Dec 2004
Posts: 11
|
Thanks for the loving smack across my head
I appreciate your responses re VA's. My problem remains.Given the history and experience of the group, I would appreciate ideas that meet the issue stated earlier. Good Investment ideas for a portion of assets that take risk off the table. Thanks
|
|
|
06-11-2012, 06:09 PM
|
#10
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2008
Location: NC
Posts: 21,303
|
Quote:
Originally Posted by at_last
I appreciate your responses re VA's. My problem remains.Given the history and experience of the group, I would appreciate ideas that meet the issue stated earlier. Good Investment ideas for a portion of assets that take risk off the table. Thanks
|
At present, there are no good ways (that I know of) to take risk off the table with much of an outlook for real return. I'd buy a SPIA before a VA under any circumstances I can think of...but as your OP noted, now is a horrible time to buy a SPIA if you can afford to wait (most likely for years).
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
|
|
|
06-11-2012, 06:51 PM
|
#11
|
Thinks s/he gets paid by the post
Join Date: Oct 2002
Location: Chattanooga
Posts: 3,893
|
The last sentence in the pros and cons of annuities article says it all.
As you can see, everything is not what it appears with an annuity. You need to read all of the fine print before investing a dime.
__________________
Earning money is an action, saving money is a behavior, growing money takes a well diversified portfolio and the discipline to ignore market swings.
|
|
|
06-11-2012, 07:14 PM
|
#12
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
|
Quote:
Originally Posted by at_last
Good Investment ideas for a portion of assets that take risk off the table. Thanks
|
Can you more precisely describe what kinds of risk you are worried about? Inflation risk? Fluctuations of the value of your investment (even if, long term, the particular investment has always gone up?). Risk of default? Currency risk?
At the risk of stating the obvious: The closer an asset comes to "zero risk", the lower the returns will be. The most popular way to reduce risk to your overall portfolio's value and to grow it is to assemble a variety of different assets that are not positively correlated in the way their value changes in response to various changes in the economy and market (interest rates, exchange rates, stock values, etc). Each asset class my be "risky" (that is, volatile) in itself (thus, normally, generating higher overall returns) but the overall portfolio value remains relatively stable. This strategy sometimes falls short. Few assets did well during the 2008 downturn. But over time it has produced good results.
If you want a single investment with very low risk (and, of course, low returns as well), you could invest in short-term CDs, or those that allow you to bump up the rate during the term of the CDs. You can get an Ally Bank 4 year "Raise your Rate" CD with a 1.45% APY right now, and you can call to get the rate increased twice during that term if rates go up. They have only a 60 day interest penalty for early withdrawal. It's a pathetically low interest rate and you'll probably lose ground to inflation--but it's not a bad choice in the present environment.
|
|
|
06-11-2012, 07:50 PM
|
#13
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,370
|
Quote:
Originally Posted by at_last
I appreciate your responses re VA's. My problem remains.Given the history and experience of the group, I would appreciate ideas that meet the issue stated earlier. Good Investment ideas for a portion of assets that take risk off the table. Thanks
|
How do you think that a VA will get you off the roller coaster? What VA subaccounts are you planning to use? In most cases the subaccounts are equity funds or bond funds so all you will end up with is a different roller coaster with high fees.
There is no way to avoid risk these days. You could invest in CDs or money market fund or a short term bond fund and have the illusion of no risk, but the unseen risk with those investments is that since inflation exceeds returns the spending power of your money is declining. In order to earn returns that exceed the inflation rate you need to take on more risk, and those riskier investment fluctuate in value.
|
|
|
06-11-2012, 08:17 PM
|
#14
|
Thinks s/he gets paid by the post
Join Date: Jul 2005
Posts: 4,366
|
From Fidelity's web page:
"
'Safe' investments that are actually risky
BY penelope wang,
Money Magazine — 06/05/12
...
Index annuities
The pitch: Earn the returns of stocks with no risk of losing money, thanks to the underlying insurance on your investment. Your money will also grow tax-deferred, and you can convert to an annuity later on.
The reality: These are complex policies that don't deliver what you might expect.
Instead of mirroring a stock market index, the annuity's returns are capped -- recently many policies limited gains to 3.5% annually (the specific cap can change).
Worse, those returns don't include dividends, which have historically accounted for the bulk of the market's long-term returns.
Index annuities also incur high costs. And unless you hold for 10 years or more, you'll have to pay steep surrender charges to sell -- as much as 20% to start."
|
|
|
06-11-2012, 09:00 PM
|
#15
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
|
Brewer posted a link to this article several months ago.
How To Create Your Own Indexed CD or Equity Indexed Annuity On the Cheap
The lead-in to the article:
Quote:
Banks, brokers and (especially) insurance agents love to sell a product that has a very mouth-watering top line pitch: equity market upside without the risk of losing money. Unfortunately, the reason they love to sell these products is that the commissions to the salesperson are typically fairly generous and the economics of the product are attractive to the bank or insurance company underwriting the paper. These products go by various names, most commonly appearing in the form of an equity indexed CD, equity indexed annuity, or fixed indexed annuity. Due to the very simple construction of these products, they are actually quite easy and cheap to reproduce in under 30 minutes a year in your very own brokerage account, giving you much better returns and offering a lot more flexibility.
|
For an extremely risk-averse investor it's a method to participate in the equities market while risking no losses. You'd give away some of the "upside" potential, and you might lose some buying power to inflation, but if you start with $100K, you're guaranteed to have at least $100K 18 months later.
I thought it was an interesting approach that might be a good and much cheaper alternative for some people considering Equity Indexed Annuities and other expensive products.
Thanks again, Brewer.
|
|
|
06-11-2012, 09:46 PM
|
#16
|
Moderator Emeritus
Join Date: Dec 2002
Location: Oahu
Posts: 26,860
|
Quote:
Originally Posted by at_last
Good Investment ideas for a portion of assets that take risk off the table. Thanks
|
If you want to take risk off the table, then buy a single-premium immediate annuity. You could buy one now, or you could wait a few years to see how your retirement portfolio is doing.
If you want to take risk off the table then you'll pay for the privilege of the insurance. That's why returns are so low.
If you're trying to chase a higher yield in an annuity, then you're going to get that yield only after you pay a bunch of fees & expenses. If we were going fishing, those fees & expenses would be called "bait" and you'd be gnawing on the hook.
__________________
*
Co-author (with my daughter) of “Raising Your Money-Savvy Family For Next Generation Financial Independence.”
Author of the book written on E-R.org: "The Military Guide to Financial Independence and Retirement."
I don't spend much time here— please send a PM.
|
|
|
06-12-2012, 07:50 AM
|
#17
|
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 at_last
I appreciate your responses re VA's. My problem remains.Given the history and experience of the group, I would appreciate ideas that meet the issue stated earlier. Good Investment ideas for a portion of assets that take risk off the table. Thanks
|
As a diversifier and a generally lower risk (and modest return) option, I have a chunk of money invested in merger arbitrage funds. A detailed explanation of these things can be found here: Life, Investments & Everything: Picking Up Nickels In Front Of A Steamroller
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
|
|
|
Thanks for your insights!
06-12-2012, 11:20 AM
|
#18
|
Dryer sheet wannabe
Join Date: Dec 2004
Posts: 11
|
Thanks for your insights!
I have to keep remembering- there's no free lunch!
|
|
|
06-12-2012, 11:22 AM
|
#19
|
Thinks s/he gets paid by the post
Join Date: Mar 2006
Location: Houston
Posts: 4,337
|
Quote:
Originally Posted by at_last
I have to keep remembering- there's no free lunch!
|
I must disagree. There is a free lunch but only if you don't buy the VA the guy's selling.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
|
|
|
07-21-2012, 07:01 AM
|
#20
|
Thinks s/he gets paid by the post
Join Date: Jul 2011
Location: The Bay Area
Posts: 2,736
|
__________________
You may be whatever you resolve to be.
100% x 10% > 10% x 100%
Small pensions & SS cover essentials
|
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|