immediate annuity (again)

[FinanceDude]

Ha, I think that both investments and insurance are just discounted cash flows.  The main difference in my ind is that I expect an investment to be a positive NPV proposition, while I expect (and hope) that insurance will be a negative NPV proposition.

Good point.......... Now Ha has his answer.................

 

[JohnEyles]

Not trying to get this poor tired old wrung-out thread going again,
EXCEPT to comment that I just saw yet another article promoting SPIAs:

http://tinyurl.com/ql6km

... and I'm starting to wonder who's paying these journalists to write all
these pro-SPIA stories. Ok, we know WHO, but why NOW; why is the
insurance industry so eager to sell these things now, as opposed to
previously ? Do they know something we don't, e.g. interest rates are
on the way up ??

 

[brewer12345]

They think they smell a gigantic market opportunity, what with the Boomers coming up on retirement. They are probably right. After all, "there's a sucker born every minute."

 

[FinanceDude]

They think they smell a gigantic market opportunity, what with the Boomers coming up on retirement. They are probably right. After all, "there's a sucker born every minute."

Well..................if you believe the insurance industry's research, that states: "Boomers retiring in the next 5-10 years, most of whom will not have a lifetime pension to help fund a potentially long retirement (25-30) years, are the ideal client for immediate annuities and VA with guaranteed income riders"................

 

[donheff]

They think they smell a gigantic market opportunity, what with the Boomers coming up on retirement. They are probably right. After all, "there's a sucker born every minute."

I think we can expect all sorts of variations on SPIAs comming out in the coming years. Most will be total rip-offs and a few may make some sense (to those for whom the basic concept of annuity as longevity insurance is appealing). Hopefully, Brewer et al will be around to point to the flaws. Who knows, maybe there will be a few gems in the pile of manure..

 

[Nords]

They think they smell a gigantic market opportunity, what with the Boomers coming up on retirement. They are probably right. After all, "there's a sucker born every minute."

Boomers retiring? Wouldn't we all be bored & unfulfilled, and have any of us saved enough money?

I think there's a logical inconsistency here that the financial industry hasn't decided how to address yet. We're either all working until we drop or desperately seeking annuities, but we can't do both.

 

[FinanceDude]

I think there's a logical inconsistency here that the financial industry hasn't decided how to address yet. We're either all working until we drop or desperately seeking annuities, but we can't do both.

Now that is funny!!

Remember the infamous saying: "Make sure you don't die with a bunch of annuities, your beneificiaries WILL NOT be amused"..............

 

[brewer12345]

I think there's a logical inconsistency here that the financial industry hasn't decided how to address yet. We're either all working until we drop or desperately seeking annuities, but we can't do both.

Remember that we are in an increasingly stratified society. Despite the large numbers of fools Boomers who have not saved enough, there is also a sizable slug of the generation that has money but is clueless about how to manage it. So the wolves personal financial advisors have plenty of marks to con with these products. As exhibit A, take a look at the obnoxious pandering of the Ameriprise "Dreams" ad campaign. Where that puking emoticon, anyway?

 

[FinanceDude]

Remember that we are in an increasingly stratified society. Despite the large numbers of fools Boomers who have not saved enough, there is also a sizable slug of the generation that has money but is clueless about how to manage it. So the wolves personal financial advisors have plenty of marks to con with these products. As exhibit A, take a look at the obnoxious pandering of the Ameriprise "Dreams" ad campaign. Where that puking emoticon, anyway?

Keep in mind, Brewer, the key phrase is not only "clueless about how to manage it", but also "too lazy to become less clueless on how to manage it".................

You may disagree with me, but most people spend 20 times as much time trying to save $100 on their new car as they do learning about personal finance.

I did a night class at the local high school a few years ago, and tried to teach basic lesson of money to juniors and seniors. They were allowed to bring a parent.

I saw one guy (parent) write out about 10 PAGES of notes during the 50 minute lecture, during which I was showing how to balance your checkbook, and how to use credit cards wisely. His answer? "You should charge for this stuff, I learned a TON tonight"

 

[brewer12345]

Keep in mind, Brewer, the key phrase is not only "clueless about how to manage it", but also "too lazy to become less clueless on how to manage it".................

No argument from me on that score. I think the lack of even basic money management education in the US is deplorable. It doesn't even require much math ability. Heck, I have a graduate degree in finance and I am not good for much beyond the most basic of algebra. 99% of managing one's finances can be done with 6th grade math.

 

[FinanceDude]

No argument from me on that score. I think the lack of even basic money management education in the US is deplorable. It doesn't even require much math ability. Heck, I have a graduate degree in finance and I am not good for much beyond the most basic of algebra. 99% of managing one's finances can be done with 6th grade math.

Yeah, well during my delusional college days, I decided being a math monir would be cool. Needless to say, 3rd semester calculus did me in.............third derivatives? Give me a break, that was the end of that........

Bottom line, the school systems don't want it in their curriculum, neither do the colleges. And most of the "investment seminar series" are about SELLING, not TELLING.........

Come to think of it, those 3rd derivatives never helped me balance my checkbook..........

 

[2B]

No argument from me on that score. I think the lack of even basic money management education in the US is deplorable. It doesn't even require much math ability. Heck, I have a graduate degree in finance and I am not good for much beyond the most basic of algebra. 99% of managing one's finances can be done with 6th grade math.

I took 22 credits in business and economics at the University of Washington in the 1970s. Now that would have earned me a minor in business. I kept waiting for them to get to "the point" since, as an engineer, I already understood the math.

 

[Brat]

I have a 60 yo brother who is in an apartment after settling his divorce and selling the house. All that cash is just sitting in his checking account (I hope), it is not invested (I am sure). I gave him an investment plan a year ago.

He receives a modest disability RR retirement.

After watching him do nothing for about a year I have come to the conclusion that for him buying a well located condo in a good solid building and buying a income annuity with 5% annual increase from Vanguard is one way to prevent him from eating dog food at 85. At least he has an income stream and could do a reverse mortgage on the condo if need be.

 

[FinanceDude]

I have a 60 yo brother who is in an apartment after settling his divorce and selling the house. All that cash is just sitting in his checking account (I hope), it is not invested (I am sure). I gave him an investment plan a year ago.

He receives a modest disability RR retirement.

After watching him do nothing for about a year I have come to the conclusion that for him buying a well located condo in a good solid building and buying a income annuity with 5% annual increase from Vanguard is one way to prevent him from eating dog food at 85. At least he has an income stream and could do a reverse mortgage on the condo if need be.

Or not take on debt, and use the extra cash to help build up a stream of income........ If he has trouble with his budget, why put him in debt for $150,000 or more

 

[Brat]

Eh, he has no debt, he has ample cash which is not being invested.

I have been using the Buy vs Rent Dinkytown calculator to determine the sweet spot based on his current rent and investment returns (0). He could purchase that condo for cash and pay the HOA, utilities and taxes out of current income.

 

[FinanceDude]

Eh, he has no debt, he has ample cash which is not being invested.

I have been using the Buy vs Rent Dinkytown calculator to determine the sweet spot based on his current rent and investment returns (0). He could purchase that condo for cash and pay the HOA, utilities and taxes out of current income.

If he can pay cash, then that's different. You did say he wasn't good with money, so maybe tying it up in a somewhat illiquid investment is ok..............

I guess YOU know the situation better than me................

 

[Brat]

His idea of an investment is savings bonds and he hyper-vents when I bring up the subject of mutual funds. Even his GF, who he thinks walks on water, can't get him to fill out a Vanguard application. ARRAH!!!

The core area has a forrest of construction cranes - high end condos going up like there is no tomorrow. Hopefully that will bring the price of condos in classic buildings down to 2004 levels by next spring and cash will be king. Maybe I am getting old, but the cost of those puppies makes my eyes cross. With steel and concrete at record highs, and the overlay of planning and building department requirements, I can understand the increases... BUT where are the customers comming from? God willing there will be 'condo investors' who bought in 04 who need to sell or risk forclosure this spring.