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Old 05-15-2013, 06:57 PM   #21
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Originally Posted by allanlevy View Post
Well thanks--I appreciate your comments. BUT you have not provided any supporting analysis with your recommendation for "others to stay away". It would be nice if you had a mathematical or financial vs purely emotional/anecdotal foundation for your perspective. I, for one, think I am asking a fair and important question, substantiated by pretty detailed information, and apoplicable not only to me, but likely a host of others.

Care to respond in kind? Anyone?

With respect,
Allan
Your respect is lacking, as several people pointed out that you compared 4% 'SWR' (which is COLA'd) to 5.25% non-COLA. Those are hard numbers.

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b) compared to the "4%" safe WR rule, you (I) can pull out 5.25% for life safely --that's a huge increase in annual WR, and
No, it's not a "huge increase". From the FIRECALC runs I've done, a COLA'd income stream is worth about 2x a non-Cola one. So 4% 'SWR' is roughly equivalent to about 2.6% non-Cola'd. A DECREASE in annual WR, not a 'huge increase'.


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...

Does anyone out there think I may not be insane? (Except for the respondent who said they liked the Vanguard product VA so much they bought 2 more--thanks, maybe I have one supporter in my ranting/raving views

-Allan
So anyone who disagrees with you needs to provide hard numbers, but if they agree with you - no questions asked? I see.

Like so many, you seem to be here for validation rather than education. With that attitude, you will get neither.

-ERD50
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Old 05-15-2013, 07:15 PM   #22
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I bought a VA from Vanguard and liked it so much I bought 2 more.....
The ones that Vanguard sells are very low fee, comparitively. Also, they don't have a bunch of goofy rules and crap, right? You simply are buying a fund that's a wrapper for an underlying Vanguard fund. The VG fund goes up, you make paper wealth, it goes down, you lose paper wealth. No funky rules to worry about (or salivate over, if you're of that ilk). Then, you have the choice at some point to conver the whole works to an immediate annuity? If that's all it is, and it's not lining the pockets of a salesman, then a VA might not be so bad. That's a long way to say that not all VA's are created equally.
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Old 05-15-2013, 07:15 PM   #23
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Originally Posted by allanlevy View Post
.... It drives me a bit batty that I cannot find intelligent literature on this subject (pro or con) except from the sellers of such products who are obviously biased.....
That would be my first hint.

There are some really smart people posting here but in the end it is your decision of course, and you appear to already know what you want to do.

Here is a thread one of them started that might interest you:

How to replicate an equity-indexed annuity (EIA)
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Old 05-15-2013, 07:40 PM   #24
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....One of the reasons I posted this thread. is so someone with more financial smarts than I might comment on the "ROI" aspects or risk/reward aspects of this product. It drives me a bit batty that I cannot find intelligent literature on this subject (pro or con) except from the sellers of such products who are obviously biased. If anyone can provide me a reference I would sure appreciate it....
If it were me, I would look at the prospective cash flows under a handful of reasonable scenarios after all fees, etc. IOW what you pay out and what you receive in as benefits under each scenario and then compute an IRR for each set of cash flows.
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Old 05-15-2013, 08:58 PM   #25
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Hmmm, you don't understand what you are being sol;d, likely have not read the prospectus, are completely convinced that you found the holy grail? Well, it is your money. Enjoy the butt-raping.
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Old 05-15-2013, 09:16 PM   #26
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I would need to know more about the VA in order to make any pertinent comments. Among the questions I have:

1. Is this a deferred or immediate annuity? If deferred, how many years before you start to collect.

2. What are the surrender charges if your situation changes and you want to take your money out? How much are the other sales charges and fees?

3. What portion of your investable funds are your dedicating to the VA?

4. Are your stated returns and death benefit guaranteed regardless of market performance?

5. What is the financial strength of the underwriting company?

Etc, etc.

I have not found a VA product that financially makes sense for me after I've had the chance to review all the details, but am always willing to see what's out there. The industry is always tweaking their products and bringing out new ones. It's interesting to learn about the new things.

These are complex instruments and the cautions raised by multiple posters are important to bear in mind...though it is probably academic in this case as you have already purchased the VA.
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Old 05-15-2013, 09:40 PM   #27
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You might want to forget about the 2x gain in 10 years. That sounds like funny money to me. Though of course we don't have the 37 pages of fine print that describe all this in detail. That's why we can't talk exact numbers.

How much money do you put in? How much money do you get out and when? Can you compare present values to see if it's worth it? Can you find a comparable product from Vanguard to compare prices? You won't find an article saying your XYZ VA is the third best VA you can get. Will a simple single payment immediate or deferred annuity work just as well for you? They typically have lower fees, and they have the lifetime income component you want.

VA's are not inherently bad, as you note, but if you're paying 2% in fees every year, and a giant sales commission, you can do much better with something else. Do you know exactly what your costs are for your VA? Not what the salesman says, but what all the fine print says.
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Old 05-15-2013, 09:58 PM   #28
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Hi Allan,

I have a VA also. I bought the Prudential X Series w/ HD Lifetime Income last year. I put in $150K and am guaranteed to get $23,492 per year for life in 20 yrs at 65. I also bought 3 deferred index annuities which will provide me with $23,267, $54,412 and $50,776 for a grand total $151,946 at 65. I don't care about the comments that I could have done something better with the money as I have plenty of other money to louse up with between now and then and if I do better with it than so be it.

I give all my cautions about annuity buying in other threads that you can find by searching so I won't repeat them. None of the products I bought is now available with the terms I got because the rates have gone down. I didn't get them at the peak rates because I was still in research mode on annuities at that time. Such is life. I'm very happy having something that I don't have to worry about to back stop me in my senior years. I've ridden the investment roller coaster up and down over the last couple of decades and I wanted to get off. Everyone feels differently about it. For me it was the right thing to do.

Best wishes!
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Old 05-15-2013, 11:31 PM   #29
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Yes..

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Originally Posted by sengsational View Post
The ones that Vanguard sells are very low fee, comparitively. Also, they don't have a bunch of goofy rules and crap, right? You simply are buying a fund that's a wrapper for an underlying Vanguard fund. The VG fund goes up, you make paper wealth, it goes down, you lose paper wealth. No funky rules to worry about (or salivate over, if you're of that ilk). Then, you have the choice at some point to conver the whole works to an immediate annuity? If that's all it is, and it's not lining the pockets of a salesman, then a VA might not be so bad. That's a long way to say that not all VA's are created equally.

This is mostly correct....you can't turn into an immediate annuity but that really isn't a problem because you can pull all the money out if you want and if you are so inclined, purchase a SPIA (or anything else for that matter) It is another reason I went with Vanguard, the fact it is an the Wellington fund and I can close it anytime with no costs...
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Old 05-16-2013, 07:22 AM   #30
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Allan, find the Scott Burns website. Somewhere there he did a comparison of various annuities. If I recall correctly, Vanguards offering came out on top. He still wasn't't enthusiastic about the product.

Rich
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Old 05-16-2013, 07:58 AM   #31
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Allan, find the Scott Burns website. Somewhere there he did a comparison of various annuities. If I recall correctly, Vanguards offering came out on top. He still wasn't't enthusiastic about the product.

Rich
I'll even give the OP that link. AssetBuilder - Variable Annuities: A Product That Doesn.

There really are dozens of articles with "supporting analysis" and "a mathematical or financial foundation" warning against VAs online, just a Google away. And a search here will also provide many threads discussing the "merits" of VAs, probably the reason earlier posts didn't go into more detail.
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Old 05-16-2013, 08:05 AM   #32
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I am not a big fan of annuities but this study by Dr. Pfau has me thinking SPIA's (not variable annuities) might play a part in a future income stream. We'll see.

Do You Need Bonds in Retirement? - The Smarter Investor (usnews.com)

https://papers.ssrn.com/sol3/papers....act_id=2151259
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Old 05-16-2013, 10:20 AM   #33
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Hi Allan,

I have a VA also. I bought the Prudential X Series w/ HD Lifetime Income last year. I put in $150K and am guaranteed to get $23,492 per year for life in 20 yrs at 65. I also bought 3 deferred index annuities which will provide me with $23,267, $54,412 and $50,776 for a grand total $151,946 at 65. I don't care about the comments that I could have done something better with the money as I have plenty of other money to louse up with between now and then and if I do better with it than so be it.

I give all my cautions about annuity buying in other threads that you can find by searching so I won't repeat them. None of the products I bought is now available with the terms I got because the rates have gone down. I didn't get them at the peak rates because I was still in research mode on annuities at that time. Such is life. I'm very happy having something that I don't have to worry about to back stop me in my senior years. I've ridden the investment roller coaster up and down over the last couple of decades and I wanted to get off. Everyone feels differently about it. For me it was the right thing to do.

Best wishes!
There are some numbers we can work with! I get about 4.84% return for the Prudential VA at guaranteed levels and if you live to 95. A little over 4% if you live to 85. Plus your lifetime guarantee and hopefully a chance for better income if things go well.
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Old 05-16-2013, 02:11 PM   #34
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There are some numbers we can work with! I get about 4.84% return for the Prudential VA at guaranteed levels and if you live to 95. A little over 4% if you live to 85. Plus your lifetime guarantee and hopefully a chance for better income if things go well.
Very interesting! I did alot of calculations but not the one your doing. So for my other three can you do the same?
EQ $250K in, $54,412 in 20 years at age 65.
ML $250K in, $50,776 in 20 yrs at age 65.
AV $133K in, $23,267 in 20 yrs at age 65.

Thanks!
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Old 05-16-2013, 02:33 PM   #35
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Originally Posted by allanlevy View Post
Well thanks--I appreciate your comments. BUT you have not provided any supporting analysis with your recommendation for "others to stay away". It would be nice if you had a mathematical or financial vs purely emotional/anecdotal foundation for your perspective. I, for one, think I am asking a fair and important question, substantiated by pretty detailed information, and apoplicable not only to me, but likely a host of others.

Care to respond in kind? Anyone?

I am sincerely looking for numerically solid supporting or rebutting information. Heck I would even take a solid analysis report reference from an expert objective third party group, like consumers reports, if I could find one.

Further, recognize there is an massive industry around this exceptionally important need (guaranteed lifetime with drawls with fair and reasonable expense). Surely not everyone in the industry are "bad actors" (granted many are, and its wise to know how to spot them). But a market demand so great (longevity insurance) will also draw at least a few players in the industry offering a good product at a fair cost/risk tradeoff. You really think such a huge market would go without the emergence of at least a few "fair" players? There is so much to gain for all parties.

So I ask again--provide numerical or substantial objective expert 3rd party support for your position. Else, I can't accept your generous but obvious disingenuous platitudes about my golden product find. Nor should anyone unilaterally stay away from such a product based on what information you did not provide.

With respect,
Allan
It appears that you are buying the product primarily for the non-COLA'd lifetime income. But, you haven't given your age so it's hard to do numbers. Contact a NYL or MetLife rep and get a quote on a 10 year-deferred, no cash value, lifetime pay, annuity for your ages (aka pure longevity insurance).

If the NYL or MetLife product costs more than the single premium you're paying on the VA, you've found a better deal (assuming you really want/need lifetime non-COLA'd income). If it costs less, then presumably the extra premium on the VA buys you things in addition to the lifetime income. Make a list of those extras and see if they are worth the extra premium.
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Old 05-16-2013, 02:58 PM   #36
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EQ 6% to age 95, 5.25% to 85
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Old 05-16-2013, 04:01 PM   #37
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+1

They are paying you back with your own money. That is the bulk of what you are getting and you are getting it in dribbles.
No the VA does not go to zero if you live too long, it grows with market performance (in this way it behaves a bit like a bond at maturity, when you die the account balance xfers to hiers.)
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Old 05-16-2013, 04:06 PM   #38
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Old 05-16-2013, 04:44 PM   #39
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No the VA does not go to zero if you live too long, it grows with market performance (in this way it behaves a bit like a bond at maturity, when you die the account balance xfers to hiers.)
I looked at a several VA. Generally they do go to zero not too long after you start taking payments (same thing for my equity indexed annuities). BUT your income doesn't go down for life. The things that cause the real account to go to zero include:
1) When you start taking payments your getting a fixed percentage to take out each year that is based on a virtual account guaranteed increase per year and your age. This is usually higher than the 4% safe withdrawal rate. This is taken off your real dollars account.
2) The fees every year are taken off your real dollars account, not the virtual account that is growing for you to get your guaranteed income. The fees can be based on your virtual account. This whittles things down out of the real account in a hurry.

But if you die before you start taking payments then your heir will generally get a chunk of change. It won't be as big a chunk of change as it would have been if it had been in the market due to the fees but the fees are buying you the life time income, should you need it.

In the models I got from the insurance companies if you start taking payments your real account slides to zero faster than you would think.
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Old 05-16-2013, 04:44 PM   #40
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Someone is smoking some really good stuff...
And they would like you to join them for a big 'ol toke.
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