"Guaranteed" Investment

[tightasadrum]

It's bound to be a Variable Annuity with a guaranteed income payout of, oh let's see, 5% after X years. Probably worthwhile to you only if you have no other guaranteed income payments. Oh wait, you probably have Social Security income coming. Like one poster suggested, don't agree to anything while he's there. Read it, and read it carefully.

 

[panacea]

It's bound to be a Variable Annuity with a guaranteed income payout of, oh let's see, 5% after X years. Probably worthwhile to you only if you have no other guaranteed income payments. Oh wait, you probably have Social Security income coming. Like one poster suggested, don't agree to anything while he's there. Read it, and read it carefully.

+1
This is really good advice. If the "advisor" is the real deal, there should be no pressure to sign anything. Gather the information, look it over carefully and get back to him on your own terms. Let us know what you find out. Can't wait!

 

[haha]

+1
This is really good advice. If the "advisor" is the real deal, there should be no pressure to sign anything. Gather the information, look it over carefully and get back to him on your own terms. Let us know what you find out. Can't wait!

This violates the businessperson's mantra: Always Be Closing.

Ha

 

[panacea]

This violates the businessperson's mantra: Always Be Closing.

Ha

LOL- "Always Be Closing" reminds me of Glenn Gary Glenn Ross. First prize, a Cadillac... Second prize, a set of steak knives... Third prize, you're fired.

 

[ARB57]

I'm no expert, but only one word comes to mind for me: RUN!

 

[FinanceDude]

I am wondering if the "guarateed investment is the famous "equity-linked CD" ploy............

 

[pb4uski]

or an equity indexed annuity.

 

[misanman]

I am wondering if the "guarateed investment is the famous "equity-linked CD" ploy............

I have a feeling that it might be, but don't know for sure. I did a quick forum search for this but didn't find much. I did find information on the web, and it didn't sound altogether awful. Under what circumstances would this option make sense?

 

[misanman]

We have a winner

or an equity indexed annuity.

We have a winner! Actually it's an equity indexed annuity with an income rider. Actually seemed to make some sense as an alternative to a SPIA. Getting ready to leave town for a bit but I'll plan to post details next week when I return. Should be fun to see what this board thinks of it. Sort of like "throwing it to the lions".

 

[Koolau]

We have a winner! Actually it's an equity indexed annuity with an income rider. Actually seemed to make some sense as an alternative to a SPIA. Getting ready to leave town for a bit but I'll plan to post details next week when I return. Should be fun to see what this board thinks of it. Sort of like "throwing it to the lions".

Heh, heh, details? This Forum don't need no stinkin' details. We can trash equity indexed annuities (with or without an income rider) without no stinkin' details - probably before you return.

 

[REWahoo]

Actually it's an equity indexed annuity with a [-]n income rider[/-] hefty commission.

FIFY...

 

[Koolau]

See what I mean?

 

[FinanceDude]

We have a winner! Actually it's an equity indexed annuity with an income rider. Actually seemed to make some sense as an alternative to a SPIA. Getting ready to leave town for a bit but I'll plan to post details next week when I return. Should be fun to see what this board thinks of it. Sort of like "throwing it to the lions".

Those products are GREAT (for the agent and the insurance company, and noone else)............

 

[misanman]

Some Details

Okay, here are some details. I'd rather do this than pack my suitcase.

There are two parts, the Equity Indexed Annuity and the Income Rider. I assume they took this approach because I told them I was considering a SPIA.

EIA
- from North American Company for Life and Health Insurance
-14 year term (includes immediate 10% bonus, so $100K becomes $110K)
-Client can select amoung 4 buckets each year: fixed, 1 yr Pt to Pt (6% cap), Monthly Pt to Pt (2% cap), or Monthly average (2% cap)
-100% participation
- can be renewed at end of term or cashed out
- can be assumed by spouse at death
- no fees other than surrender fees (start at 18% and decline to 2% in last year)

Income Rider
- An initial fee that starts at .35% ($350 on $100K) - a little unclear what it could go up to
- Customer determines when to start drawing income. The longer you wait the more you can draw. If I started immediately I would get 5.6%. If I waited 5 years I'd get 8.5%
- The income stream reduces the EIA balance but if the balance goes to zero the income stream continues uninterrupted.
- There's a fair amount of "***** pocus" around all these calculations so more study is needed.

They claim this achieves the income stream of a SPIA without giving up control of your capital. Of course, if you want to continue the income stream you have to keep the money in the EIA so this seems a bit bogus.

Okay, have at it. Tell me why this is a bad idea.

 

[jclarksnakes]

Security Benefit has a similar product. It has an 8% bonus when you start and adds 8% each year to the basis for a guaranteed lifetime withdrawal.
https://www.siaincome.com/
https://www.siaincome.com/calculator.aspx
I would want to compare them side by side before buying one or the other and would not put too large a percentage of my portfolio into one of these things.

 

[brewer12345]

Okay, here are some details. I'd rather do this than pack my suitcase.

There are two parts, the Equity Indexed Annuity and the Income Rider. I assume they took this approach because I told them I was considering a SPIA.

EIA
- from North American Company for Life and Health Insurance
-14 year term (includes immediate 10% bonus, so $100K becomes $110K)
-Client can select amoung 4 buckets each year: fixed, 1 yr Pt to Pt (6% cap), Monthly Pt to Pt (2% cap), or Monthly average (2% cap)
-100% participation
- can be renewed at end of term or cashed out
- can be assumed by spouse at death
- no fees other than surrender fees (start at 18% and decline to 2% in last year)

Income Rider
- An initial fee that starts at .35% ($350 on $100K) - a little unclear what it could go up to
- Customer determines when to start drawing income. The longer you wait the more you can draw. If I started immediately I would get 5.6%. If I waited 5 years I'd get 8.5%
- The income stream reduces the EIA balance but if the balance goes to zero the income stream continues uninterrupted.
- There's a fair amount of "***** pocus" around all these calculations so more study is needed.

They claim this achieves the income stream of a SPIA without giving up control of your capital. Of course, if you want to continue the income stream you have to keep the money in the EIA so this seems a bit bogus.

Okay, have at it. Tell me why this is a bad idea.

Well, first and foremost would be carrier risk. I won't dwell on it, but lets not forget that you would become a creditor of an insurance company with only a state guarantee fund to look to if things went sour. This is nothing like as strong as FDIC backing.

The EIA part is something you can replicate on your own at a fraction of the cost and with no surrender charges. There is a fairly detailed explanation of how to do so here: Life, Investments & Everything: Rolling Your Own

An 18% surrender penalty! That tells us a lot about how huge the commission must be.

Finaly the annuity part is just a SPIA in sheep's clothing. Go price a SPIA for your age and you can see how close the payout is from other companies. If you won't consider a SPIA at all, why would you want teh option of getting a SPIA on top of a massively overpriced collection of bonds and call options that also exposes you to the credit risk of the insurer?

 

[FinanceDude]

The 14 year surrender charge is another reason NOT to buy.........