One more time, variable annuities....

[donheff]

I still wouldn't touch a variable annuity with someone else's ten foot pole. I have expressed interest in inflation protected SPIAs but the current situation has given me pause about the viability of insurance companies. DC has a much higher guarantee than other jurisdictions so if they and most of the companies survive this current mess I may still keep SPIAs in the possible category as I get older.

 

[soupcxan]

The Journal says: Lower Fees Make Annuities More Attractive

Lower Fees Make Annuities More Attractive - WSJ.com

Wow, when they said "lower fees" they are talking about an annual fee of 2% instead of 3%. I can't imagine throwing away 2% of my portfolio every year for what is essentially an index fund (the only annuity choice at the lower fee level is a 60/40 stock/bond split according to the article). I could do that at Vanguard for a tenth of the cost.

 

[Rich_by_the_Bay]

Wow, when they said "lower fees" they are talking about an annual fee of 2% instead of 3%. I can't imagine throwing away 2% of my portfolio every year for what is essentially an index fund (the only annuity choice at the lower fee level is a 60/40 stock/bond split according to the article). I could do that at Vanguard for a tenth of the cost.

And if I understand this correctly, those are only the insurance carrier's fees. Expenses of their underlying funds are added on to that (or buried in their returns). Then there are the surrender fees if you want out sooner.

 

[soupcxan]

Then there are the surrender fees if you want out sooner.

Why on earth would you want to get out of such a great investment

 

[Art G]

Art, do you ever stop quoting from the insurance sales manual?

Apparently you don't read my other posts. I've suggested stocks and bonds on this site, and most have done quite well.
On the other hand, have you ever considered that perhaps you misjudged the product and this happens to be the perfect market conditions to have bought VA's months ago. I just looked at one of my policies. People made fun of it, it was guaranteed after five years you could walk away with worst case scenario 1.5% gain per year for a very low fee. Now the fund is still well above that value, but how nice in knowing it can't lose money?
Ya' know, I understand this is a board for "me hate brokers and can brag that I don't need 'em". However, just imagine if the world turned upside down and they actually added value?!!!!
Would it take a lightning bolt before some of you people admitted you have something you could learn from a professional?

 

[REWahoo]

I ask "Art, do you ever stop quoting from the insurance sales manual?" and you respond with:

Apparently you don't read my other posts. I've suggested stocks and bonds on this site, and most have done quite well.
On the other hand, have you ever considered that perhaps you misjudged the product and this happens to be the perfect market conditions to have bought VA's months ago. I just looked at one of my policies. People made fun of it, it was guaranteed after five years you could walk away with worst case scenario 1.5% gain per year for a very low fee. Now the fund is still well above that value, but how nice in knowing it can't lose money?
Ya' know, I understand this is a board for "me hate brokers and can brag that I don't need 'em". However, just imagine if the world turned upside down and they actually added value?!!!!
Would it take a lightning bolt before some of you people admitted you have something you could learn from a professional?

I'll take that as an emphatic "NO!"

 

[Art G]

Well that was a pretty poorly thought out response. Nice job, way to prove my point.

 

[REWahoo]

Art, you are so much fun!

 

[harley]

Apparently you don't read my other posts. I've suggested stocks and bonds on this site, and most have done quite well.
On the other hand, have you ever considered that perhaps you misjudged the product and this happens to be the perfect market conditions to have bought VA's months ago. I just looked at one of my policies. People made fun of it, it was guaranteed after five years you could walk away with worst case scenario 1.5% gain per year for a very low fee. Now the fund is still well above that value, but how nice in knowing it can't lose money?
Ya' know, I understand this is a board for "me hate brokers and can brag that I don't need 'em". However, just imagine if the world turned upside down and they actually added value?!!!!
Would it take a lightning bolt before some of you people admitted you have something you could learn from a professional?

In my opinion, a bad investment is a bad investment. I knew when I started investing decades ago that the stock market had it's ups and downs. Every once in a while something can look like a good investment compare to the market when it's in one of it's down swings. For instance, gold was looking pretty good back in the early 80s. But it wasn't a good long term investment, except in small amounts as a hedge.

If I had bought VAs months ago, I would be looking pretty for a few months/years. But overall it's a losing proposition. I'm in for life, and there's no way a VA can justify itself over the long haul. And there's no way the world could turn upside down and they could add value. If the wrld turns upside down, they will be defaulting right and left. You can say it ain't so, but anyone who can do simple math can see it. Sadly, they don't seem to teach math in schools anymore.

As far as learning from profesionals, I can learn things from my 2.5 y.o. grandaughter, and from my dogs. I can learn from pros too. But I can add, subtract, and do other basic math. All a VA salesman can teach me is to check my Caller ID before I answer.

 

[Sarah in SC]

Would it take a lightning bolt before some of you people admitted you have something you could learn from a professional?

Um, speaking as one (or at least that is what my paper says), yeah, I learn a lot from professional money managers, with whom I am very fortunate to speak during the course of my work life.

Additionally, and perhaps more importantly for my own investment decisions, I also learn a great deal from the professional money managers on this board, and I include the ones with only one client (themselves) on that list of learned scribes.

 

[haha]

Nope, still hate them. I would rather suffer a total portfolio meltdown than give even one dime to an annuity salesman.

Highly rational viewpoint.

 

[2B]

Did another insurer pick up your policy? Did you get any sort of cash settlement from the state's fund?



Lost money from investing in them or buying their product? If it was a policy, wouldn't it still be serviced by Thrivent?

It wasn't my policy but was owned by the father of a friend. He put enough money into a Lutheran Brotherhood SPIA for several thousand dollars a month in payments. Lutheran Brotherhood went under and he spent about 2 years lawyering up before the "insurance" kicked in. He got about $1000 per month but he went without anything for 2 years and then got only a small percentage of his "safe" money.

 

[FinanceDude]

And if I understand this correctly, those are only the insurance carrier's fees. Expenses of their underlying funds are added on to that (or buried in their returns). Then there are the surrender fees if you want out sooner.

All VAs have a no-surrender option you can purchase, just a little FYI....

 

[Marquette]

It wasn't my policy but was owned by the father of a friend. He put enough money into a Lutheran Brotherhood SPIA for several thousand dollars a month in payments. Lutheran Brotherhood went under and he spent about 2 years lawyering up before the "insurance" kicked in. He got about $1000 per month but he went without anything for 2 years and then got only a small percentage of his "safe" money.

Well that doesn't make sense, Art just said a few posts ago that the above shouldn't happen. However shall we reconcile an accounting of a real life story with a statement to the contrary from a broker?

 

[CuppaJoe]

Did another insurer pick up your policy? Did you get any sort of cash settlement from the state's fund?

Thanks, Marquette, yes it will pay out as agreed but I chose a ten-year-payout instead of lifetime because I do not trust annuities.

When Executive Life failed, my company was setting up an ESOP. A meeting was set up for employees to meet with the company’s financial planner. The meeting had been cancelled and put off a week or so because the financial planner who recommended Executive Life had committed suicide. The new FA said that he had been saying he couldn’t stand to have people look at him because he put so many into those annuities. Over the last year or so on this forum posters occasionally say things like,”it’s not so bad, people are not jumping out of windows”; but keep in mind people keep suicides private. There was a news story just last week about an unemployed FP who blew away his entire family, San Jose, I think, nice house.

At the time I thought, imagine that, someone thought that something he did at work mattered. How times have changed, or maybe they haven’t. That was the early ‘90s but I still remember how it feels to have a small pension in jeopardy.

 

[Marquette]

And, now we have some balance (morbid though it is) on the other side. A company went under but you'll still get the full balance of the annuity agreement.

Did another carrier pick up your policy? I'm not familiar with the Executive Life failure. If you don't mind sharing, was it a 'big' or 'not so big' policy?

 

[2B]

And, now we have some balance (morbid though it is) on the other side. A company went under but you'll still get the full balance of the annuity agreement.

Did another carrier pick up your policy? I'm not familiar with the Executive Life failure. If you don't mind sharing, was it a 'big' or 'not so big' policy?

The key thing to do if you buy an annuity is to make sure it's under your state's "insurance" limit. State insurance funds are underfunded for a significant failure. The "insurance" aspect does not represent "the full faith and credit" of the individual states like their bonds mostly do. In the event of a major drop, I would expect a state to not come to the full "insurance" rescue because it would be in times like we're in now. Every state and local government is currently scrambling for money. Credit is tight and tax revenues are falling rapidly. Only the Feds can print money and there's a limit to how much they can print before we start using it for TP.

 

[Art G]

Well that doesn't make sense, Art just said a few posts ago that the above shouldn't happen. However shall we reconcile an accounting of a real life story with a statement to the contrary from a broker?

I wish you wouldn't put words in my mouth.

 

[Marquette]

The key thing to do if you buy an annuity is to make sure it's under your state's "insurance" limit. State insurance funds are underfunded for a significant failure. The "insurance" aspect does not represent "the full faith and credit" of the individual states like their bonds mostly do. In the event of a major drop, I would expect a state to not come to the full "insurance" rescue because it would be in times like we're in now. Every state and local government is currently scrambling for money. Credit is tight and tax revenues are falling rapidly. Only the Feds can print money and there's a limit to how much they can print before we start using it for TP.

I need to do some digging but my impression is that the reserve pools for most states are somewhat funded and cap coverage. I'm also not sure if they limit coverage to individuals or if they include trusts and endowments as well. I'd have to defer to someone much more knowledgeable in that area.

My previous point was that we now have two eyewitness accounts, one where the party was obviously screwed out of a significant chunk of what they thought was a rock-solid agreement and another where it seems to be honored. Just trying to learn more.

 

[Art G]

Um, speaking as one (or at least that is what my paper says), yeah, I learn a lot from professional money managers, with whom I am very fortunate to speak during the course of my work life.

Additionally, and perhaps more importantly for my own investment decisions, I also learn a great deal from the professional money managers on this board, and I include the ones with only one client (themselves) on that list of learned scribes.

Yes, I agree. There is much to be learned from people on here, however, is this a healthy outlook?

Originally Posted by Gumby
Nope, still hate them. I would rather suffer a total portfolio meltdown than give even one dime to an annuity salesman

 

[REWahoo]

Yes, I agree. There is much to be learned from people on here, however, is this a healthy outlook?

Not if you're an annuity salesman.

 

[ziggy29]

 

[Art G]

WOW! My post hadn't even appeared on my screen before someone couldn't wait to take a shot! Amazing.
Yes, it's much better to wish your money away. No investment concerns then.

 

[Art G]

Awesome emoticon! I must steal that!!

 

[Marquette]

Thanks, Marquette, yes it will pay out as agreed but I chose a ten-year-payout instead of lifetime because I do not trust annuities.

And, just because I'm too darn centrist, I'd like to explore the do not trust part of that as well.

For me, I think it'd come down to the fact that I either put so little into an annuity that it makes no material difference. Or, I place so much in that I'm exposed to single carrier risk. Now, we know that carrier investment assets are held separate from general funds, and we know that states have insurance pools. But, 2B has a compelling experience w/r/t Lutheran Brotherhood and you had bad luck with Executive.

Some companies are more forthcoming in how (in a big bucket sense) they allocate their investment capital, but still you don't know the details. You get more transparency by buying a VA. You limit downside and upside, but you at least know what you're allocating money towards. At that point, you're exchanging the overhead fees from the carrier (and your money isn't going into passive indexes) for access to a risk pool larger than 1 (or two if you're married).

Anyway, no real point, but I don't know that I'm smart enough to pick the right carrier, just like I don't know that I'm smart enough to pick the right stocks. With stocks, at least, I can spend time and really research and get to know a lot more about a company. With an annuity, and given what we've seen with ratings, I'm not sure that someone could ever get a solid feeling for the underlying strength.