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Fixed Index Annuities
Old 04-03-2011, 08:41 AM   #1
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Fixed Index Annuities

Does anyone have "the skinny" on fixed index annuities ? I shudder to ask my financial advisor for obvious reasons. Are their any up-sides. A financial talk sow was talking this morning about them as the best thing since the invention of sliced bread and with NO downside risk. This last statement immediately raised my scam financial planning antenna.

Any thoughts / opinions (constructive)

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Old 04-03-2011, 09:21 AM   #2
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Considered a dirty word around here.

Here you go:

fixed indexed annuity
FIA looks like just what I need.
Annuity with a guaranteed 8% annual return

Read it and run like h3ll before angry mob shows up

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Old 04-03-2011, 09:29 AM   #3
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Originally Posted by ferco View Post
I shudder to ask my financial advisor for obvious reasons.
Maybe it's time to find a new financial advisor?
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
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Old 04-03-2011, 10:03 AM   #4
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Ugh, here we go again.

These things are complex, have lots of hidden expenses, and are mostly sold by the "iffier" insurers. If you dig around the forum I have explained how to DIY with less cost, more transparency, and a whole lot more flexibility.
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."

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Old 04-03-2011, 03:14 PM   #5
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These posts always turn out the same, so I'll just leave it alone this time. I think there's some of my posts in the threads referenced above.
Disclaimer - I am an independent insurance agent. If the above message contains insurance-related content, it is NOT intended as advice, and may not be accurate, applicable or sufficient depending on specific circumstances. Don't rely on it for any purpose. I do encourage you to consult an independent agent for insurance-related advice if you have a question that is specific in nature.
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Old 04-03-2011, 04:56 PM   #6
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OK, I'll take a stab at it. Here's my answer:

1. Read every word of the fine print, and assure yourself that you completely understand it.

2. Follow Rich_in_Tampa's advice above.

3. Ask the seller all the questions you can think of that weren't covered by that fine print you read. Be sure your questions are answered fully.

At that point, you will either know enough to make the right decision for you, or you might have the insight to know the right additional questions to start asking. These things are complicated, they're never "one size fits all" and you have to do a lot of homework before you can determine if one is right FOR YOU.
I thought growing old would take longer.
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Old 04-03-2011, 08:25 PM   #7
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Read Brewer's posts on how to DIY. Or use this approach:

I assume "no downside risk" means you can't lose nominal dollars. Suppose you have $10,000 to invest.

1) Buy a 10 year treasury strip, they were trading around 70 last week. U.S. Treasury Strips - Markets Data Center - so you put $7,000 into a bond that will be worth $10,000 10 years from now.

2) The remaining $3,000 goes into Vanguard's Index 500 fund.

3) After 10 years, you have a guaranteed $10,000 plus something. The "plus" part will be larger or smaller depending on what the Vanguard fund does, but it won't be negative.

You will have a hard time finding an indexed annuity that can compete with that simple portfolio.

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