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04-07-2008, 12:19 PM
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#61
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Moderator Emeritus
Join Date: Sep 2007
Posts: 17,774
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Deleted because some feelings were involved.
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04-07-2008, 12:26 PM
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#62
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Full time employment: Posting here.
Join Date: Feb 2006
Posts: 987
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Quote:
Originally Posted by brewer12345
Tell you what: I will give you/your estate 5X what you give me today. But you won't get it for 100 years. Still want to talk about how many times your initial investment got you from the SPIA?
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Actually, my contract (which is for a 28-year guarantee) for me/DW (either/or alive) has a 100% payback in 14 years - 2x at 28 years. If both die before the 28 period ends, our beneficiary has the option of either continuing payments or getting a lum sum (normally would not take a lump sum due to taxes, but our estate is going to charity, so that's not a problem).
Oh - BTW, if we would (according to the contract) die before the first monthly payment/check is issued, our estate gets 100% back. If we die after the first payment is made, the 2x (minus one payment) goes to our estate (which again, would go to charity).
So in fact, we have a "reducing value term". If we die earlier, there is a "better payoff" for the receipient.
Remember - it's "reverse life insurance". It pays while you are alive; life insurance pays (someone) when you're dead. As for me (and my DW) we would rather "die with money than live without it ".
- Ron
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04-07-2008, 12:32 PM
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#63
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Full time employment: Posting here.
Join Date: Feb 2006
Posts: 987
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Quote:
Originally Posted by Bestwifeever
Personally I'm not sure I would buy an annuity. I have no problem with someone "giving" me an annuity such as SS or a pension. I'm not sure I would take a lump sum in lieu of a pension (just as I would not exchange our "lump sum" nest egg for an annuity). I wonder if the annuity cos. are getting more aggressive in their marketing directly to individuals because their former customers, the companies offering pensions, are fading fast?
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Would you consider what me/DW did? That is, buy an SPIA with 10% of our retirement portfolio at the time we purchased it last year?
BTW, the monthly payment covers about 40% of my current gross income (my DW still works, so that 10% is getting reduced overall as she still contributes to her 401k/IRA, and our joint accout grows in value).
Also, as part of the application process, you must "attest" that you have no more than 50% of retirement assets being used to buy an SPIA. Sort of like a credit check done when buying a home - to ensure that you don't "overload" on these vehicles.
- Ron
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04-07-2008, 12:37 PM
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#64
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Full time employment: Posting here.
Join Date: Feb 2006
Posts: 987
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Quote:
Originally Posted by Independent
The Slate article should have said something that's common on this board.
If you have an interest in buying an SPIA, first look at deferring SS to 66, or even 70. The "annuity purchase price" for SS is usually better than you can get from a private insurer.
I doubt that annuity salespeople normally point that out.
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Of course, U R correct. However, in my case, I was looking for a constant revenue stream to provide me $$ while I wait for my SS in 11 years. For me, it's "income gap insurance".
BTW, I did not purchase it from any "salesman". All I'll say is that I did the normal investigation using Immediate Annuities - Instant Annuity Quote Calculator. in addition to quotes from Vanguard and Fidelity.
- Ron
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04-07-2008, 12:38 PM
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#65
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Quote:
Originally Posted by twaddle
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There are a whole host of these things floating around out there. If you poke around the American Exchange's site, tehy have a "Structured Products" listing that has a pile of them. The trick is that there is always a catch, and they can have some very strange embedded structures/options.
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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04-07-2008, 12:42 PM
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#66
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Moderator Emeritus
Join Date: Sep 2007
Posts: 17,774
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Quote:
Originally Posted by rs0460a
Would you consider what me/DW did? That is, buy an SPIA with 10% of our retirement portfolio at the time we purchased it last year?
BTW, the monthly payment covers about 40% of my current gross income (my DW still works, so that 10% is getting reduced overall as she still contributes to her 401k/IRA, and our joint accout grows in value).
Also, as part of the application process, you must "attest" that you have more than 50% of retirement assets being used to buy an SPIA. Sort of like a credit check done when buying a home - to ensure that you don't "overload" on these vehicles.
- Ron
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Sorry that I deleted my post above because I had no facts to offer.
Since we have a pension and SS that will cover more than 50% of our existing income and a SWR of our nest egg will cover the rest, and since I see the pension and SS as defacto annuities (perhaps erroneously, but that's what I shine at, being erroneous) I would probably not get another form of annuity. Without the pension it would be mighty tempting. I can tell you thought this out well.
Question to you: Would you buy another SPIA when your spouse retires?
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04-07-2008, 12:46 PM
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#67
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Full time employment: Posting here.
Join Date: Feb 2006
Posts: 987
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Quote:
Originally Posted by 2B
Haven't you seen the commercial about the 100 year old trumpet player? He needs an annuity because he is so vibrant, etc......
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Yes, he (along with about a half-dozen other folks from the same home) were on a Barbara Walters special (you can see the program, here):
Watch Live to be 150 – Barbara Walters Live to be 150 online
People are living to an older age (and will continue to do so in the future); better prepare for it! BTW, Barbara will be 79 in September - not bad for an "old babe" not even close to ER .
Additionally, don't count on your age lasting to about the same as your close relatives. Studies have shown that genes only contribute about 25% to your longetivity.
- Ron
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04-07-2008, 12:57 PM
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#68
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Full time employment: Posting here.
Join Date: Feb 2006
Posts: 987
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Quote:
Originally Posted by Bestwifeever
I can tell you thought this out well.
Question to you: Would you buy another SPIA when your spouse retires?
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"Yes" to your first statement. "Maybe" to your second.
I bought it to "gap" the 11 year period until I get SS, after I retired last year.
As far as my DW, at this time (assuming she retires shortly) probably not, since we have various sources of income coming "on-line" over the next 10 years, including two small pensions (wife - at age 65), SS (wife - age 62, me - age 70) and a small VA disability check that I currently receive (inflation indexed, tax free) for me till I pass.
Remember, we still have 90% of our retirement net worth (actually it's like 110% when you consider the "guaranteed return" of the SPIA) for investment purposes.
The SPIA was to "fit a need" (and it does it quite well, thank you). What the future brings, who knows?
- Ron
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04-07-2008, 01:02 PM
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#69
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Full time employment: Posting here.
Join Date: Feb 2006
Posts: 987
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Quote:
Originally Posted by clifp
I notice the FAQs don't have an annuity section. Any interest in trying to develop ER.org wisdom on annuities?
I'll start with this rule.
Rule 1. In some cases it makes sense to buy annuity. However, you should NEVER buy an annuity that somebody is selling you.
Explanation: Most annuities in the US are sold by insurance salesman, brokers, financial advisor and other people operating on commissions. These commission are typically very high, over the life of annuity as much as 1/4 to 1/3 (what is the total lifetime cost of a bad annuity) of your money will end up in the pockets of the salesman and the annuity firm. You almost always can save significant amount of money by buying an annuity directly from a firm like Vanguard or ?.
Annuity salesman are just like dope dealers just say NO
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Actually, I agree (surprised?)
Did my own research (see one of my other comments) and my contract specifies no sales or annual service fee. I did not go through a "sales person". The selected company (of course) is making their money from my single payment, much like a fund has an annual charge but you don't get a "bill". It's just taken before any distributions are made.
- Ron
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04-07-2008, 01:03 PM
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#70
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Moderator Emeritus
Join Date: Jun 2007
Location: At The Cafe
Posts: 6,873
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Quote:
Originally Posted by rs0460a
Nor mine; if you can, either copy/paste here or link to the other site. Let's get some "valid" info to discuss (either positive or negative) - we're here to discuss facts, not "feelings".
Thanks!
- Ron
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The story so far: In 1986 my employer called us into a meeting with their financial advisor regarding the new pension/profit sharing plan. At the end of the meeting they asked those of us who had vested in the discontinued Defined Benefit Pension Plan to stay, both of us. I was furious that they had cancelled this plan just before a slew of my buddies would have vested. We were told that the plan was put into an Executive Life Insurance Company annuity (non-COLAed). During the meeting I remember thinking 15%!!! expected return, I thought my employer was getting off really cheap. (To be fair I may have mis-remembered it as 15%).
Here are the facts and numbers:
Executive Life Insurance Company Single Premium Retirement Annuity Contract, Life Annuity,
Monthly annuity payment: $326.25, first payment date, 10/01/08.
Cost of Retirement Annuity Contract applied for: $3,438.99.
May the Participant surrender his individual contract after it is issued but before his retirement? The "No" box is checked.
From a letter from my employer: "...a contract will be issued in your name which will guarantee the benefits provided by the plan. This will assure that the contract is in your possession and that your vested benefit will not be jeopardized by the future of the company, or the trustees’ inability to locate you in the future."
*****
Executive Life Insurance Company failed, got restructured by the State of Ca, and my contract was sold to Aurora National Life Assurance Company of Los Angeles.
*****
The State took over the contract, 9/3/93:
This contract is issued pursuant to the Plan of Rehabilitation for Executive Life Insurance Company as ordered by the Superior Court of the State of California for the County of Los Angeles and replaces the Owner’s prior contract.
Date of prior contract: 2/28/86; Account Value on contract date before enhancement: $9,806.91, covered percentage: 100.0000%; Guaranty Association Enhancement Amount on Contract Date: $6,856.45, Allocation Holdback Amount on Contract Date: $1,471.04, additional holdback amount on contract date: $412.71, conservation date statutory reserve: $12,621.50, deferral interest rate, years 1-15 after issue date of prior contract: 11.000%, Annuity rate: 10.5000%, years 16-25 after issue date of prior contract: 10.500%, after 25th anniversary of issue: 10.500%, annuity mortality table: 83. Anticipated basic benefit payment: $192.00; anticipated Guaranty Association Benefit Payment Enhancement: $134.25; sum: $326.25.
*****
Aurora bought the contract:
Contract Values Summary as of 9/03/93 (including Election Forms):
Total estimated Aurora Account Value: $16,551
The statutory limit for your contract under your Participating Guaranty Association is: $100,000.
I didn’t opt out but here are the numbers: Total estimated first opt-out payment: $7,099; the amount above is after deduction of the Holdback Amount: $1,471.
Credited Interest Rates, daily basis: Unloaned account value 9/03/03 to 2/27/94: Short Term Interest Rate based on the 30 day U.S. Treasury Bill; 2/28/94 to first contract anniversary on or after 2/28/94: 5.34%, thereafter as declared by Aurora (Minimum 4%)
Loaned account value 9/03/03 to 2/27/94: 5.25%; 2/28/94 to first contract anniversary on or after 2/28/94: 5.25%, thereafter rate charged by Aurora on the loan balance less 2.25% (Minimum 4%)
From a letter from Aurora dated August 2000: "To better serve you, we are pleased to announce that on October 5, 2000, the MYND Corporation in Wethersfield, CT, which is in the greater Hartford area, will become the administrator of Aurora’s life insurance and annuity contracts. The MYND Corporation service team is committed to providing you with world class customer service and will be able to address all requests related to your life insurance or annuity contract.... Aurora appreciates the confidence you’ve placed in our company and looks forward to meeting your needs to come...."
On April 4, 2008 I requested info about my annuity, they will send out a benefit questionnaire and then will send me an "illustration."
To be continued.
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04-07-2008, 01:15 PM
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#71
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
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04-07-2008, 03:43 PM
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#72
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2006
Posts: 7,733
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Quote:
Originally Posted by FinanceDude
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I am not sure of the exact numbers, but if you assume 5% commission and 2.5% ER for typical sold annuity vs buying one yourself from Vanguard, I think over 30 years you'll easily end up with 25-33% less money.
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04-07-2008, 04:15 PM
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#73
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Thinks s/he gets paid by the post
Join Date: Mar 2006
Location: Houston
Posts: 4,337
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I have had to deal with my FIL's VAs. They weren't "mine" but since he had Alzheimer's when he bought them I can't be too hard on him. I did get to enjoy the pleasure of redeeming them "early" since he needed the money to live on. I got to see their beauty and glory up close and personal.
My own father bought a VA "for his children" with his entire life savings. He didn't tell anyone what he was doing and when he told my sister even she was shocked and tried to get it undone. It was too late. So now, the five of us will split the high fee annuity early in 2009. My father got it locked up real tight. I wanted to pay the penalties after he died but my sisters didn't want to. Fortunately (or unfortunately), the absolute value of the annuity isn't a major portion of my assets so I didn't want to create a family fight. I'm real familiar with what a crappy "investment" my father made for his children.
__________________
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
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04-07-2008, 06:01 PM
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#74
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
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Quote:
Originally Posted by 2B
I have had to deal with my FIL's VAs. They weren't "mine" but since he had Alzheimer's when he bought them I can't be too hard on him.
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You Sweetheart! Don't let anybody say that kindness is dead in America today.
Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
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04-07-2008, 07:00 PM
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#75
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
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04-07-2008, 07:06 PM
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#76
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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Quote:
Originally Posted by clifp
I am not sure of the exact numbers, but if you assume 5% commission and 2.5% ER for typical sold annuity vs buying one yourself from Vanguard, I think over 30 years you'll easily end up with 25-33% less money.
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The 5% commission is NOT an extra internal charge. You are right about the ER and M&E togther being 2.5% or so. The agent gets 5%, but there's not an "extra" internal charge to compensate the advisor. Maybe you will believe me on that, maybe not. But, I do know.........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
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04-07-2008, 09:01 PM
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#77
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Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 4,629
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Quote:
Originally Posted by clifp
I notice the FAQs don't have an annuity section. Any interest in trying to develop ER.org wisdom on annuities?
I'll start with this rule.
Rule 1. In some cases it makes sense to buy annuity. However, you should NEVER buy an annuity that somebody is selling you.
Explanation: Most annuities in the US are sold by insurance salesman, brokers, financial advisor and other people operating on commissions. These commission are typically very high, over the life of annuity as much as 1/4 to 1/3 (what is the total lifetime cost of a bad annuity) of your money will end up in the pockets of the salesman and the annuity firm. You almost always can save significant amount of money by buying an annuity directly from a firm like Vanguard or ?.
Annuity salesman are just like dope dealers just say NO
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I think my "Rule 1" would be to differentiate between annuities for accumulating money and annuities for paying money out.
In the jargon, the difference between a deferred and an immediate annuity.
One is longevity insurance. The other is a tax-deferred CD or mutual fund. The financial analysis is entirely different.
We probably have a couple people with insurance licenses who post here. I think they'd say there is nothing resembling a 25% commission on an SPIA.
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04-07-2008, 09:10 PM
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#78
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Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 4,629
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Quote:
Originally Posted by 2B
I'm being ugly about annuities again but I'll point out that the appeal of annuities is in the looooooogn term instead of the time between 62 or 65 and 70. If you look for the IRR for the short term, you will never buy an annuity if you can do simple math. The sales pitch is always about the long term of 30 or 40 years when you have lived beyond your assets. They never point out that the annuity payment that looked so good today is a mere pittance in 40 years with a trivial inflation rate. Haven't you seen the commercial about the 100 year old trumpet player? He needs an annuity because he is so vibrant, etc......
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Yes, immediate annuities are all about the long term.
Deferring SS only makes sense if you think there is a reasonable chance that you could live long enough to outlive your money.
Since SS is CPI adjusted, you don't have the big concern about inflation shrinking your payout.
(Of course, the really clever strategy, as mentioned on this board, may be to take SS at 62, then "change your mind" at 66, repay your benefits, then restart then at a higher rate.)
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04-08-2008, 08:46 AM
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#79
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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Quote:
Originally Posted by Independent
I think my "Rule 1" would be to differentiate between annuities for accumulating money and annuities for paying money out.
In the jargon, the difference between a deferred and an immediate annuity.
One is longevity insurance. The other is a tax-deferred CD or mutual fund. The financial analysis is entirely different.
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Hey, I'm all for analysis of the facts..........
Quote:
We probably have a couple people with insurance licenses who post here. I think they'd say there is nothing resembling a 25% commission on an SPIA.
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There's not. As a few know on here, there are NO M&E charges or ER on a fixed annuity or SPIA. The "hold" the company has on you in a fixed annuity is the surrender period, and a SPIA is the fact you transferred the funds permanently to the insurer, in return for a guaranteed fixed payment. The IRR on most SPIA's is only slightly better than the IRR of SS...........
Most fixed annuities pay a one-time fee to the advisor of 1.5-2% of the lump sum amount put into them, kind of a finder's fee if you will.........it PALES in comparison to the 10% commissions on EIAs or the 4-6% commissions on VA's.
I feel my input on these threads is not to defend or villify annuities, but I have a lot of knowledge about how they work and can clarify things if folks on here want that...........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
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04-08-2008, 08:47 AM
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#80
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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Quote:
Originally Posted by Independent
Since SS is CPI adjusted, you don't have the big concern about inflation shrinking your payout.
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I don't look at SS as CPI- adjusted,because that adjustment is not reality. What was the "adjustment" this year, 2.9%? Do any of you that collect think that was a true COLA?, because I don't..........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
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