One more time, variable annuities.... - Page 2

Art G · 10-07-2008, 09:48 AM

Quote:

Originally Posted by Marquette

Would that be an annuity with Hartford, getting an infusion from Allianz, or an annuity with Aviva, a company that just reported 30% of it's capital surplus wiped out, or maybe an annuity with AIG, a company selling their life business in the UK to pay off a certain bailout.

I just don't know, I guess I've got a penguin problem.

So far, AIG is still in existence and claims they will honor their guarantees. Supposedly these companies used hedging strategies like S&P LEAPS to protect themselves. For what it's worth, I've been buying AIG stock lately, I think they'll make it.
As to the insurance products themselves, the money is held completely separate from the general funds of the company itself.
The theory of the insurance company is that the living benefit will be paid out over a long period of time. Many of those recipients will die and thus never receive those benefits. Many will never need nor request them. For the first many years, they will merely be giving back the clients funds.
With all that said, if these insurance companies do fail, another insurance company would have to pick up the contracts and decide to honor the benefits. I have my doubts that any profitable company would wish to do this, HOWEVER, right this minute, it's a heck of a lot better chance of working than the guaranteed loss I'm viewing on my mutual fund statements right now.
For my money, I'd much rather have the chance of the benefit I paid for actually keeping their contractual obligation than knowing I have none at all.
For some really smart people on this board, I truly can't believe you are so closed minded that you wouldn't at least admit the benefits may be there.
For those interested, I'd be happy to explain further, but in all honesty, the products were better done BEFORE the market tanked. All JMO.

Art G · 10-07-2008, 09:51 AM

Quote:

Originally Posted by ziggy29

Given the current "situation" you are describing, don't you think this is a little too much of a leap of faith?

Yes, it is a leap of faith. That's why months ago I suggested only picking the strongest of companies. I've outlined in my last post why it may still work. Insurance companies have been around for centuries without going under. Obviously the gov't wants to keep them around.

Art G · 10-07-2008, 09:56 AM

Quote:

Originally Posted by ats5g

Let's see:

1) The fees. Keep on paying north of 2% while I pay 0.15%.
1a) With those high fees, your upside is going to be no better than bonds, unless you're stilll smoking the crack pipe and think stocks are going to return 10% before fees.
2) Taxation. Keep on turning those capital gains and qualified dividends into ordinary income.
3) You can't tax loss harvest while I can.

I've always been willing to pay fees for service. I have auto insurance though I've rarely used it. I have home owners insurance though I've rarely used it. I have life insurance though....well I'm hoping not to use it.
There are also many services I'm willing to pay a bit more for.
Let me say this, if that 2% works out, it was one of the best bargains I've ever gotten.
I've got plenty of bonds and preferred stocks that are down to nothing. My GMAC bonds are currently valued at $28. Where's the value there?
The VA has a 7% annual step up towards income, regardless of market results.
Taxes, if the money is spread out over a lifetime it's not that much, and it beats the heck out of your capital loss.

Marquette · 10-07-2008, 01:39 PM

Quote:

Originally Posted by CuppaJoe

As the holder of an annuity from the defunct Executive Life Assurance Co. HATRED does not begin to express my attitude. But I will moderate myself and refer you to dozens of posts by 2B.

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

Quote:

Originally Posted by 2B

It's great having the right kind of reputation. Don't forget the Lutheran Brotherhood failure. I know a guy that went to his grave pissed at how much he lost in their failure.

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

REWahoo · 10-07-2008, 01:48 PM

Quote:

Originally Posted by Art G

I've always been willing to pay fees for service. I have auto insurance though I've rarely used it. I have home owners insurance though I've rarely used it. I have life insurance though....well I'm hoping not to use it.
There are also many services I'm willing to pay a bit more for.
Let me say this, if that 2% works out, it was one of the best bargains I've ever gotten.

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

donheff · 10-07-2008, 02:18 PM

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 · 10-07-2008, 02:54 PM

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_in_Tampa** · 10-07-2008, 03:02 PM

Quote:

Originally Posted by soupcxan

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 · 10-07-2008, 03:13 PM

Quote:

Originally Posted by Rich_in_Tampa

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 · 10-07-2008, 03:37 PM

Quote:

Originally Posted by REWahoo

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 · 10-07-2008, 03:55 PM

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

Quote:

Originally Posted by Art G

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 · 10-07-2008, 04:35 PM

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

REWahoo · 10-07-2008, 04:42 PM

Art, you are so much fun!

harley · 10-07-2008, 04:51 PM

Quote:

Originally Posted by Art G

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** · 10-07-2008, 07:48 PM

Quote:

Originally Posted by Art G

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 · 10-07-2008, 10:05 PM

Quote:

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.

Highly rational viewpoint.

2B · 10-08-2008, 04:56 AM

Quote:

Originally Posted by Marquette

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 · 10-08-2008, 08:56 AM

Quote:

Originally Posted by Rich_in_Tampa

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 · 10-08-2008, 10:37 AM

Quote:

Originally Posted by 2B

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?

10-07-2008, 02:18 PM	#26
donheff Thinks s/he gets paid by the post Join Date: Feb 2006 Posts: 2,688	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. __________________ Every man is, or hopes to be, an Idler. -- Samuel Johnson

10-07-2008, 04:42 PM	#33
REWahoo Moderator Emeritus Join Date: Jun 2002 Location: Texas Hill Country Posts: 11,530	Art, you are so much fun! __________________ [MODERATOR EDIT]

10-07-2008, 02:54 PM	#27
soupcxan Full time employment: Posting here. Join Date: Aug 2004 Posts: 756	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.

10-07-2008, 04:35 PM	#32
Art G Thinks s/he gets paid by the post Join Date: Nov 2007 Posts: 1,052	Well that was a pretty poorly thought out response. Nice job, way to prove my point.