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lacawac · 04-11-2013, 09:27 AM

Hey everyone,just looking for some advice on a investment. I,m looking to roll over a untaxed 401 k plan that I have into an income producing vehicle. Today I met with an adviser who recommended Met Life GMIB Max with protected growth strategies. If I understand him correctly If I were to put $500K into this plan they would guarantee 5% growth each year regardless of what the market does and if the market does better than I would get that also,iff the market does worse I still get the 5%but the account investment decreases.If I wait until the fifth year to start to take out yearly income I could draw $32K every year for life,there is also a death benefit ,involved. I believe the fees are 1% ,plus 1% for the death benefit.In ord the withdrawing part of the acct allways grows by at least 5% but your market balance decreases by the moneys you withdraw . Does anyone have any knowledge and could provide insight .Thank you

brewer12345 · 04-11-2013, 09:29 AM

Run.

wmc1000 · 04-11-2013, 09:32 AM

Can't speak to MetLife but I did a 401K roll over 15 years ago and the GMIB was 6% annual growth then - glad I did that before the stock market crash. My GMIB base value for annuitization is 2.25 times larger than the account value.

jerome len · 04-11-2013, 09:39 AM

Sounds like some type of an expensive annuity to me. I'd call Vanguard and Fidelity, explain the program and ask for their competitive product. If they don't have a competitive product, ask why not.

You don't mention your age......that factor could play a very large role if it is an annuity. And, if it is, why don't they call it that?

Frankly I know very little about the product.......I do know that insurance companies charge a lot, make lots of money and we pay the fees. Good luck, I'll be interested in what everyone else has to say on this post.

FinanceDude · 04-11-2013, 09:49 AM

The fees are close to 4% internally. There are 4 costs in that product, M&E, living benefit, death benefit, and fund expenses. here is a link that might help.......

Guaranteed Minimum Income Benefit - GMIB Comparisons

lacawac · 04-11-2013, 09:51 AM

The plan is a variable annuity, I will be 60 years old this year and am retired due to a disabilty.Justtrying to generate some income ($36,000) a year to suppliment my SSDI. I have about $900K in this untaxed 401 K plan, trying to plan for the next 30 years if I make it> thanks

wmc1000 · 04-11-2013, 09:59 AM

It's easy to dismiss but if someone is looking for a guaranteed haven especially after the current run up in investment balances - (can they continue?), the peace of mind may well be worth it. I tend to be risk-averse so when I rolled my 401K over I picked high risk investments figuring I get a 6% guarantee so if they go kaput it is no loss to me. And if they go through the roof I win big time!

brewer12345 · 04-11-2013, 10:02 AM

Quote:

Originally Posted by wmc1000

It's easy to dismiss but if someone is looking for a guaranteed haven especially after the current run up in investment balances - (can they continue?), the peace of mind may well be worth it. I tend to be risk-averse so when I rolled my 401K over I picked high risk investments figuring I get a 6% guarantee so if they go kaput it is no loss to me. And if they go through the roof I win big time!

The products currently available will not let you "put it all on red."

An exercise for the reader: how much protection via equity market puts could you buy for 4% a year of your portfolio balance?

heeyy_joe · 04-11-2013, 01:00 PM

Try Fidelity RIP -Retirement Income Planner. It has a section that will help you with an understanding of whether or not an annuity, and if so in what amount, may be right for you. Comparison shopping has no substitute, and check financial strength of the firm before handing over hundreds of thousands of moolah.

Tractor guy · 04-11-2013, 01:05 PM

I know nothing about these except that they they were sold to my mother by "financial planners" that were planning to maximize their profits at her expense. Based on the other junk they sold her, I have a knee jerk distrust of anything that they have suggested.

Before signing anything, I suggest you read the boglehead wiki on variable annuities here: Variable Annuity - Bogleheads

Also read Mel Lindauer's excellent series of Forbes articles on them: Annuities: Good, Bad Or Ugly? - Forbes.com

If you need guaranteed income, a single premium fixed annuity may be something you can use. These are not pushed by salesman because they don't make so much money. With a little effort however, you can find them at Vanguard and other sources.

ERD50 · 04-11-2013, 01:35 PM

Quote:

Originally Posted by Tractor guy

I know nothing about these except that they they were sold to my mother by "financial planners" that were planning to maximize their profits at her expense. Based on the other junk they sold her, I have a knee jerk distrust of anything that they have suggested.

Sounds like a reasonable reaction from the voice of experience.

Quote:

Originally Posted by lacawac

Hey everyone, just looking for some advice on a investment.

... they would guarantee 5% growth each year regardless of what the market does

... if the market does worse I still get the 5% but the account investment decreases.

That sure sounds like some kind of circular-logic-shell-game to me. How does 'guaranteed growth' and 'the account investment decreases' fit?

I'm guessing that if you look at the fine print, it says they will give you 5% of your money (that you just gave them) each year. Until they can't. Then they won't. I have a feeling that that phrase 'the account investment decreases' plays into that.

I'll assume that 5% is not adjusted for inflation? Won't be worth so much after 20 years. But your $36K could be taken out and inflation adjusted each year from your $900K portfolio. That is 4% WR, a little high for my tastes, but it's a starting point for you.

-ERD50

hlfo718 · 04-11-2013, 02:26 PM

I don't believe your adviser is giving you correct numbers. I plugged in your info (assuming you are a woman) into Immediate Annuities -- Income Annuity Quote Calculator. and tells me you need to put in over 600k in order to receive 3k a month. But somehow Metlife is able to generate similar amount but for over 100k less, and with all the fees in the variable annuity versus a plain vanilla annuity? Something is terribly wrong.

I also doubt that 5% guarantee is actually 5% of your investment. Think about it. How can Metlife give you 5% guarantee when the bond market is yielding between 2-3%? Don't forget all the fees, around 4% or more, have to be covered with the fixed income return.

I think buying the immediate annuity is the cheapest way for you to bridge your needs. Take the remaining and invest it in Vanguard Wellington and Wellesley for capital growth.

wmc1000 · 04-11-2013, 03:19 PM

The OP stated that to get $32K a year it would take 5 years of 5% compounded guaranteed growth. That is a big difference from an immediate annuity.

And from my personal experience with my own account that the guarantee is on growth value for GMIB purposes. It is not a guaranteed cash value. And the annuity is based on the greater of the account value or the guaranteed growth value.

Independent · 04-11-2013, 04:34 PM

If your actual need is a fixed (non inflation protected) income starting 5 years from now, why not just leave your money in stocks/bonds then shop for the cheapest SPIA you can find in five years?

In general, fees on these products make them unattractive. It's possible that MetLife is temporarily underpriced because they haven't reflected the very low bond yields in the 5% annuitization factor. If you're counting on that, you need to understand what's going on very well.

wmc1000 · 04-12-2013, 06:59 AM

IMHO I believe the OP doesn't want to risk the stock/bond markets for the next 5 years and is willing to pay the price for a guarantee. After the recent huge run-up I can understand if he/she is wanting to minimize the risk that a downturn could significantly reduce the portfolio 5 years from now. Just look at a lot of the people who were planing to retire in late 2008-2009 whose portfolios got slashed and they had to postpone their retirement plans indefinitely.

ERD50 · 04-12-2013, 07:34 AM

Quote:

Originally Posted by wmc1000

IMHO I believe the OP doesn't want to risk the stock/bond markets for the next 5 years and is willing to pay the price for a guarantee. After the recent huge run-up I can understand if he/she is wanting to minimize the risk that a downturn could significantly reduce the portfolio 5 years from now. Just look at a lot of the people who were planing to retire in late 2008-2009 whose portfolios got slashed and they had to postpone their retirement plans indefinitely.

There are lots of far simpler alternatives than investing in an annuity.

Cash? Short-term bonds? CDs. 5 year CDs are only paying 1.6%, but they are 'guaranteed'.

-ERD50

timo2 · 04-12-2013, 07:48 AM

Quote:

Originally Posted by lacawac

If I understand him correctly If I were to put $500K into this plan they would guarantee 5% growth each year regardless of what the market does and if the market does better than I would get that also,iff the market does worse I still get the 5%but the account investment decreases.

That part about "the account investment decreases' would scare me off.

FinanceDude · 04-12-2013, 07:57 AM

Quote:

Originally Posted by timo2

That part about "the account investment decreases' would scare me off.

It means if the market falls, your value falls.........

Sun456 · 04-12-2013, 08:05 AM

If you do a search on annuities in this forum you can get some good info.

I bought some myself, but only after extensive research. A couple of things that you have to realize before making the leap.

1) This is not an investment. It is an insurance product. Investments do not come with guarantees.

2) The company is contractually guaranteeing you an outcome and for that you are giving some things up.

3) You are giving up access to your principal. The products are designed to drain the account through fees.

4) If you are looking for guaranteed income and don't mind buying it with the principal then I think annuities can be a great choice. For me the peace of mind was well worth it.

5) You want to spread the risk between multiple annuity companies. I spread my principal out between 4 companies in order to reduce the risk with any one company.

6) Generally if the annuity gives you a benefit they take something away in another place. So if there is a death benefit you may not get as high of a roll up rate. Look at all the details to understand the give and takes. Decide what is important to you and look for those products that give you more of what you want but be willing to trade off the elements that are not as important to you.

7) Don't buy unless you read and understand the contract. Take notes. Make your own spreadsheet. Compare the outcome with the examples the insurance company give you. Pay attention to any capitalized term. Reference their definition of it. Do not trust what the sales person tells you. They are often wrong.

I own 4 annuities but shopped many more. You have to talk to alot of sales people to get a broad view of the market. No one person carried all the products. It took alot of time but I'm happy with the result.