Life Insurance Question

[brewer12345]

Originally Posted by Art G

Ziggy! Ahhhhh, but this is the key to the new products! You don't have to annuitize anymore to get that income. So, if that obese diabetic were to die, then the remaining balance or death benefit will pass on to his heirs. In some cases, that death benefit is much higher than the current value (I've seen this on many, many occasions). In fact, there is that famous Suzie Orman video of her stating there are no benefits to VA's, then 10 seconds later eating her words when a widow explains the death benefit is much higher than the current value.
I really think the VA is the most misunderstood and unaccepted product ever, and if for no reason than that there are people on TV saying so.

Good boy! Sell that sizzle!

(Never mind that the actual steak is on the small side and full of gristle.)

[Art G]

Originally Posted by brewer12345

Good boy! Sell that sizzle!

(Never mind that the actual steak is on the small side and full of gristle.)

Sheesh, this from a guy involved with hedge funds! Probably the most questionable investment product ever designed short of the multi market short term money market fund.
You work in a product you'd never buy for yourself and then knock others, NOT BECAUSE THEY DON'T WORK, but because someone is getting paid.
You strike me as highly hypocritical.

[brewer12345]

Originally Posted by Art G

Sheesh, this from a guy involved with hedge funds! Probably the most questionable investment product ever designed short of the multi market short term money market fund.
You work in a product you'd never buy for yourself and then knock others, NOT BECAUSE THEY DON'T WORK, but because someone is getting paid.
You strike me as highly hypocritical.

I spent years following the life insurance industry and had insider status (i.e. access to material non-public information) at dozens of companies, including some of the largest manufacturers and distributors of the products in the world. DON'T lecture me on how wonderful they are for consumers.

There is a significant difference between the average investor in hedge funds and the average purchaser of annuities: the typical hedge fund investor is a HNW individual, institution, sovereign fund, fund of funds, etc. that employs CFAs, CPAs, etc. that have years/decades of exerience managing money and doing due diligence of investment managers. The typical buyer of annuities is a retail schmoe who doesn't know a stock from a bond and couldn't hope to understand the mechanics of the product they are buying even with night classes in remedial finance. Guess who I feel more protective of?

[Delawaredave5]

Originally Posted by Art G

Sheesh, this from a guy involved with hedge funds! Probably the most questionable investment product ever designed short of the multi market short term money market fund.
You work in a product you'd never buy for yourself and then knock others, NOT BECAUSE THEY DON'T WORK, but because someone is getting paid.
You strike me as highly hypocritical.

Art - how about giving us a specific VA product you like ?

Vague statements like "VAs have come a long way", "I'm a proponent of VAs", and ".. the ones today offer some outstanding advantages..." are not educating us nor advancing this thread.

Calling someone hypocritical isn't advancing this thread either....

Look forward to specifics please. Thanks.

[Art G]

Originally Posted by brewer12345

I spent years following the life insurance industry and had insider status (i.e. access to material non-public information) at dozens of companies, including some of the largest manufacturers and distributors of the products in the world. DON'T lecture me on how wonderful they are for consumers.

There is a significant difference between the average investor in hedge funds and the average purchaser of annuities: the typical hedge fund investor is a HNW individual, institution, sovereign fund, fund of funds, etc. that employs CFAs, CPAs, etc. that have years/decades of exerience managing money and doing due diligence of investment managers. The typical buyer of annuities is a retail schmoe who doesn't know a stock from a bond and couldn't hope to understand the mechanics of the product they are buying even with night classes in remedial finance. Guess who I feel more protective of?

As I said, VA's have come a long way. What you did years ago is moot now.

[brewer12345]

Originally Posted by Art G

As I said, VA's have come a long way. What you did years ago is moot now.

Right. The industry's 350BP expense ratios have gone down to 100BP, right? Agent commissions have declined 90%, right? Products have been simplified so that consumers can understand them and the life companies are strictly enforcing agent fiduciary responsibility to their customers, right?

Sure...

[Art G]

Originally Posted by Delawaredave5

Art - how about giving us a specific VA product you like ?

Vague statements like "VAs have come a long way", "I'm a proponent of VAs", and ".. the ones today offer some outstanding advantages..." are not educating us nor advancing this thread.

Calling someone hypocritical isn't advancing this thread either....

Look forward to specifics please. Thanks.

dave, I was waiting for Rockon to respond before following up, but just a light sampling....
Allianz currently will pay you either 4,5,6, or 7% income for life depending on your age (you get step ups as you get older). There is a quarterly lock of value if you're not taking income yet, meaning in December, your value locked for income purposes and this downturn didn't affect you, except to possibly get you another raise. Now, say you are taking income already, if we're down 10% this year, but up 10% next year, you'll get a 10% raise in income for life moving forward. In an up and down market, you can get some major raises without your portfolio growing at all. The downside in my opinion, you will in all likelihood, be getting such a high rate of return that you burn through the value of the portfolio and thus leave nothing for heirs.
On the other hand, if you want to earn 6 1/2% income, but also leave all the money you put in to your heirs, there is a different product. AXA has an interesting product, the downside is you may one day have to make a decision between stopping the income to leave the money for heirs, or else continue the income for life.
Right now, ING has a product that is also worth a look. Quarterly ratchets and if you don't start taking money for a while, they guarantee a double of the value for income after 10 years. They also have a decent death benefit feature with this.
Genworth has a 9% income for life if you're over 75, but there are some caveats that don't thrill me.
I could go on with a couple others, but you get the idea. It really depends on what age you need the money and what your goals are.
BTW, I hope in describing these products, I've done it competently. It's hard to not omit all features and fine print in a single post, so I certainly am not claiming that all info is included here. You'd need to seek out a professional of your choosing for more info. All JMO.

[Art G]

Originally Posted by brewer12345

Right. The industry's 350BP expense ratios have gone down to 100BP, right? Agent commissions have declined 90%, right? Products have been simplified so that consumers can understand them and the life companies are strictly enforcing agent fiduciary responsibility to their customers, right?

Sure...

What part of "living benefits" are you not understanding?

Out of curiousity, when you buy a car, do you have a price or payment in mind when you go in that you are willing to pay, or do you just ask the salesman to sell it to you for nothing?
IF I determine that I need 6% income for life, and I can achieve it, why would I care if it's done through a corporate bond, VA, or lottery?
If your boss offers you a raise in income, do you thank him by saying, "sure, but how much are you making?"
If a product suits you, it suits you. If you think there is a better product out there, then by all means, tell me that other product guaranteeing 6% for life with a chance for growth and a raise?

[brewer12345]

Originally Posted by Art G

What part of "living benefits" are you not understanding?

Out of curiousity, when you buy a car, do you have a price or payment in mind when you go in that you are willing to pay, or do you just ask the salesman to sell it to you for nothing?
IF I determine that I need 6% income for life, and I can achieve it, why would I care if it's done through a corporate bond, VA, or lottery?
If your boss offers you a raise in income, do you thank him by saying, "sure, but how much are you making?"
If a product suits you, it suits you. If you think there is a better product out there, then by all means, tell me that other product guaranteeing 6% for life with a chance for growth and a raise?

Sizzle, sizzle...

Do you disclose to your customers in any detail the credit exposure that the purchase of such a product would entail, most likely when the guarantee is of most value?

When you buy a car, do you walk in, smile and hand over a check when they offer you MSRP plus $10k with a 6 year car loan at 18%?

What part of hugely expensive, overly complicated piece of gobshite do you not understand?

[Art G]

Credit exposure? You mean like the quality of the insurance company? Absolutely I do.
I have no problem with that car salesman making a living. If I determine that $600 per month for 40 months is what I am looking for and I like the car, I will buy it. Now, if he wants to charge me $625 I will walk, but if he reaches my needs, why should I feel the right to drain him dry? Of course, if that dealership decides to sell the car at a loss because they want my service or finance business, then that's up to them as well.
You still have yet to show me a better product. I'm listening.

[ziggy29]

Originally Posted by Art G

IF I determine that I need 6% income for life, and I can achieve it, why would I care if it's done through a corporate bond, VA, or lottery?

Given that there is about 2% in embedded annual fees in a VA, I'd care because I was turning a potential 8% into 6%. Yes, maybe the 6% is all I "need" but that extra 2% could make life better or give me more to leave to my heirs.

[brewer12345]

Here you go, sport, a better product: VWELX: Basic Chart for VANGUARD WELLINGTON INCOME FUND - Yahoo! Finance

Considering that the vast majority of your customers are highly unlikely to understand the nuts and bolts of what you are selling them, how meaningful do you think your credit risk discussion is?

[Delawaredave5]

Originally Posted by Art G

dave, I was waiting for Rockon to respond before following up, but just a light sampling....
Allianz currently will pay you either 4,5,6, or 7% income for life depending on your age (you get step ups as you get older). There is a quarterly lock of value if you're not taking income yet, meaning in December, your value locked for income purposes and this downturn didn't affect you, except to possibly get you another raise. Now, say you are taking income already, if we're down 10% this year, but up 10% next year, you'll get a 10% raise in income for life moving forward. In an up and down market, you can get some major raises without your portfolio growing at all. The downside in my opinion, you will in all likelihood, be getting such a high rate of return that you burn through the value of the portfolio and thus leave nothing for heirs.
.

Art - which product did you buy ?

I looked briefly at some of the above products you mention - they just all "smell bad". It's the same "smell" I got years ago looking at Whole and Universal Life sales literature - the literature all looked too good to be true and I knew the insurance company would make boatloads of money off me - just didn't know where/how.

I bought term life insurance and invested the difference.

Same with VA's -the literature is very complex, looks too good to be true, and they are making boatloads of money off people. Smells bad.

I'll stay with my 60/40 balanced, low fee, diversified, heavily indexed portfolio any day.

And I still remain unconvinced VA's are right for anyone - except someone who needs a "financial straight-jacket" so they don't hurt themselves (even in this case a VG or Fido target retirement fund or Wellington would be a better choice).

Here's a link to one you reference - nice of them to cap the fees at 2.54% annually !!

https://www.allianzlife.com/content/...ts/ALT-141.PDF

[ziggy29]

Originally Posted by Delawaredave5

I'll stay with my 60/40 balanced, low fee, diversified, indexed portfolio any day. And I still remain unconvinced these are right for anyone - except someone who needs a "financial straight-jacket" so they don't hurt themselves (even in this case a VG or Fido target retirement fund would be a better choice).

Heck, for someone fairly risk-averse, parking all of it in something like Wellesley and/or Wellington would be far superior. Yes, there is no real "guaranteed income" component, but for those who structure their portfolios properly, that's overrated.

[FinanceDude]

Originally Posted by RockOn

I actually don't see where my situation makes that much difference, I just want the highest rate of return possible with the lowest risk. I place a much higher value on low risk vs high returns. Fee's really don't matter as long as my goal is met.

Ok, then you are like 99.999% of all Americans, other than age..........

[FinanceDude]

Originally Posted by RockOn

I have heard there are product out there with that type of return. I suppose if they took most of the long term upside in the stock markets above 7-8% and capped my return, they might be able to offer higher returns. I haven't read the fine print though. There are likely some significant catches.

They're called EIA's, and you need to stay away from them.........

[brewer12345]

Originally Posted by FinanceDude

They're called EIA's, and you need to stay away from them.........

Wooo-eee, I didn't even raise that kettle of stinking fish with my sparring partner. If VA's are a terrible deal, EIAs are like paying for an extra IRS audit.

[FinanceDude]

Originally Posted by brewer12345

Here you go, sport, a better product: VWELX: Basic Chart for VANGUARD WELLINGTON INCOME FUND - Yahoo! Finance

Considering that the vast majority of your customers are highly unlikely to understand the nuts and bolts of what you are selling them, how meaningful do you think your credit risk discussion is?

Well, to be fair,most Americans couldn't understand Wellington either..........