Lifetime Income,--With Cash Refund

[Sundance Kid]

Received, in the mail today, this offer. Purchase a One-Time Annuity, in the amount of $20,000, $50,000, or $100,000.

This will guarantee a minimum of $122, $310 or $642, (depending on which plan you chose) for your lifetime, per month. For as long as I live. If, I" Crater," the Wife, would receive a refund, for the difference, between the original purchase amount and the actual amount paid out. (Actually, it says, beneficiary gets the balance.)

Federal and State Taxes, apply to all income received. And the above monthly amounts, are estimates only!! ( Gotta send in the information form, to get an accurate quote.)

Nothing mentioned about expenses, for providing this service.

What did I miss? Other than the fcct, that I shell out a bundle up front and receive a pittance monthly, for the rest of my life? If, I live 15 years and IF, I paid
for a $20,000 annunity, I would have received a maximum of $21,960, in benefit payments.

Seems like, you could put $20,000, under a rock, for 15 years and make more than$1,960.00. Get my drift?? I'd appreciate any comments! Thanks!!

J.D (Sundance Kid)

 

[sgeeeee]

But if you live 40 more years, the annuity continues to pay.

When you buy an annuity, you are paying someone to eliminate your longevity risk. Insurance companies make people pay dearly to take on their longevity risk.

Most savvy investors can do a lot better for themselves and their families by investing on their own rather than buying an annuity. People who have significant social security and/or pension benefits coming to them almost certainly don't need to add a high cost annuity to the mix. Some people really worry about longevity risk and their investments though. If you can't sleep at night worrying about longevity risk, then an annuity might be worth it.

Annuities aren't all created equal. I was doing research on annuities a few months ago. I poked around looking at what was available and there is a lot of variability from company to company. Some of the annuity products are among the highest priced, poorest return investments you can find.

 

[2B]

sgeeee is being polite. I'm the anit-annuity troll so here goes.

This is actually pretty interesting. I've never seen it before. It almost certainly has a terrible return like all annuities but it is unique. You left a lot of necessary information off your description so I'll have to make a lot of assumptions and give you "what ifs."

Let's just look at the $100,000 annuity paying $642 monthly. The amount you receive will depend heavily on how old you are and they may even ask health questions. Remember that annuities are ultimately life insurance products. I suspect that you won't actually "qualify" for the $642 payment if you do send in your form but I'll do the math on this anyway. The only way you'd probably qualify for the $642 is if you're over 65. That way they expect you to be dead within 20 years and it would be a good bet for them to take.

If you put down $100K and get $642/month and die like a good boy at the end of 20 years you would have gotten over $150K back and achieved a 4.67% return on your money -- that's outstanding in the annuity biz even though there are CDs paying 5.5% now. If you live 13 years your DW would get essentially nothing and your return would be zero. Less than 13 and you get no return on your money but any residual would be given to your DW. If you are an "immortal" and live for 50 more years, your return would be 7.5%. It's safe to say you won't get much better up side than that.

I'll make a prediction that to get the $642 you would have to be about 68 to 70 years old which would get you about a 3% return. That's what I've been seeing on most annuities lately. Of course, then you have to consider the financial condition of the annuity company. There have been and will be failures in the future.

 

[2B]

I left off one of the biggest reasons not to own any "lifetime" annuity.  When you buy one, your money is gone.  No matter how your life situation changes the best you will be able to get is only the original promised payout.

If you go into a nursing facility with a two year or less prognosis, you can't cash it in to help cover your expenses.  Since your heath is crap, there isn't anyone in the secondary market willing to buy it from you.  Remember, it's only for your lifetime.  When you die, the payments stop.

I've often thought that the willingness to buy an annuity should be included in the tests for dementia.  If anyone buys one after looking at all of the numbers, they are, at best, math challenged.  But remember, I am the anti-annuity troll.   

 

[cute fuzzy bunny]

I'm going to bet that the fine print, in english, says:

- You give us a chunk of money
- We invest it
- We give you back a little of your principal every now and then
- When you die, we give you back whats left of your principal
- Minus a bunch of fees and administrative charges
- And we keep the money we made through investing your principal

Sounds like you buy yourself some 20-30 year bonds, hold them to term, and you get a better return, ALL of your principal back, and no fees or charges. If you're still alive...do it again!

 

[2B]

CFB --

You obviously don't appreciate the value of being told by an almost total stranger that you're making a good decision for your family's future. Of course, they neglect to mention that your decision is even better on for their family's future.

2B

 

[cute fuzzy bunny]

Dangnabit!

 

[Ed_The_Gypsy]

I left off one of the biggest reasons not to own any "lifetime" annuity. When you buy one, your money is gone.

And it could be gone during your lifetime. Remember Baldwin United? We do. We had a whole life with them.

If a mutual fund company such as Vanguard goes bust, you will not lose your funds or stocks because Vanguard never had them--they are with a costodial company.

Give your money to an insurance company for an annuity and the story is VERY different. You become an unsecured creditor. Company goes bust (say, it didn't make enough moeny selling annuities, or finds it cannot pay out what it promised, or other operations such as flood insurance after Allison lose too much money), and your $$ go with it!

 

[2B]

I'm feeling particuarly pissed off about fixed and variable annuities at the moment since DW sent in the redemption paperwork for two annuities of my FIL earlier this week.  A wonderful piece of s*** financial advisor "helped" my FIL by putting about half of his available assets (excluding his house) in a fixed and a variable annuity.  He was 82 when he bought was sold these pieces of crap.  They were both yielding 3% in the last quarter.  Since 2003, they had earned 3% in every quarter after the first "wonderful" year where they earned 5%.  Neither could be withdrawn for several years without penalty.  The first would have been available in late 2008 and the last in 2012 without penalty.  Fortunately, the first one had an assisted living clause that gets us out of the penalty.  The variable annuity doesn't so he'll get hit for that penalty.  Even with the penalty, it's better getting the money out and earning 5.5% because he'll make the penalty back in a couple of years if he doesn't need it for his assisted living first.

These were totally inappropriate for someone his age with limited savings and pensions/SS of less than $60K per year.  Annuity peddlers have no shame or ethics.  They are the lowest form of life in the questionable area of "financial advisors."

I'm still waiting for my long-departed father's (retired letter carrier -- another typical financial titan frequently needing an annuity) variable annuity to "mature" in about 2 more years.  Here there's a 10% penalty that my siblings aren't willing to eat so we're waiting.  I also will then be taxed at normal tax rates and not the step up in basis normal investments would have enjoyed as part of an estate.

 

[Sundance Kid]

I have really enjoyed the comments to my original post!
Sorry, I didn't provide more necessary information, as I was trying to be brief.
You guys, hit the nail on the head and confirmed my suspicions, that this was NOT, the way I needed to go!

It is touted, as a NEW benefit, available to those age 65 - 80. But, you can readily see, for whos benefit it's really intended.

Thanks, for your time and knowledgible responses! This is a Great board!!

 

[2B]

It is touted, as a NEW benefit, available to those age 65 - 80.  But, you can readily see, for whos benefit it's really intended.

I've looked at more than 50 annuities and have never seen this type before so I would agree with them on the "NEW" part. If you have to be 80 to get the higher benefit, the return would be pathetic with normal mortality tables. The "return of unpaid principle" wasn't included in my calcs so those lasting less than 13 years aren't pure profit for the annuity company. They would have to lower the return to compensate for the refunds.

One thing I've noticed is that people over-estimate how long they will live. I've tried to talk people out of annuities when they'd have to live to be almost 100 to equal buying CDs. They go ahead with their head full of "people are living longer now and I have to be prepared." Only the most optimistic mortality tables have 5% of us baby boomers making 100. From what I've seen of over 80, I'm not looking forward to the prospect of being around then and especially not at 100.

 

[Sundance Kid]

From my limited experience and knowledge, the NEW part, is the return of your remaining balance, to the beneficiary, following the annuitants demise. They minus out, any monthly payments received from the initial investment.

The examples shown, use 15 years to represent an amount you would actually receive, during that period. That is the only purpose I can see, for the 15 year time period.

Nothing mentioned, about age being a factor in the amount one can contribute, other than it being available to those from 65 - 80. (I've trashed the literature, so I'm going from memory.) But, I'm sure there's an unknown factor that won't be determined until one submits a request, for more factual information.

So, the way I read this: If, I'm 65 or 80 and pay 100,000 for this plan; I get $7,704.00, per year that I live. If I live ten years, I'll receive $77,040 in benefits.
DW, will receive the balance of $22,960, refunded. No interest! And, they've had my 100,000 to play with, for ten years. If, I need more than 7,704 per year, I'm screwed! Well, not really, they have provissions for limited exceptions, of course this reduces the size of the pie.

Don't want to reveal the company offering this but, ---P, doesn' show this on their website.

I'm starting to ramble, so I'll end this. Thought it might be of interest.

Thanks again!

 

[mickeyd]

Awww you guys are thinking with your actuarial hats on. Think with your markiting hats on now.

It is touted, as a NEW benefit, available to those age 65 - 80.

With my marketing hat on this is true as can be because when this sap annuity client buys the product, it will be a NEW benefit for him.

 

[Sundance Kid]

Ooops, I failed to recognize the marketing aspect! Guess I'd better get to the store and buy some of that cleaner, with 50% more cleansing power.

If termite inspecters, were as successful as they say,---- Why, do we still have termites?

 

[cute fuzzy bunny]

Guess I'd better get to the store and buy some of that cleaner, with 50% more cleansing power.

Yep, formula 410 ate through the bottle and killed everyone in the room.

So we're stuck with old 409.