One more time, variable annuities....

[Zathras]

I've never used a broad brush, as I've stated quite plainly that the product isn't right for everyone. I don't use it for everyone. However, with that said, it also shouldn't constantly be written on here that it's not right for ANYONE.

The second part of that paragraph seems to be a very good example of you using a broad brush which you denied doing in the first part
A number of people have stated that VAs have a place for some people. I myself have. I have also stated it isn't right for me and why.

So let me get this straight, with your VA I get to lock in the peak value at any time, have no limit on the upside but can never loose money.
Are their any withdrawal penalties? What are ALL the fees. I know you mentioned the 2%, is that one time, or annual and what are other fees?
Or, is their a prospectus on the internet you can link to.
You really sound like a used car salesman, and it frankly is sounding too good to be true. So if you want to show me the evidence, I'll do the research to see what the real story is.

 

[Art G]

Art, for your information Executive Life Insurance Company which CuppaJoe mentioned was a large California insurer and it failed. You can read about it plenty of places by doing a Google search. Executive Life Insurance Company - Wikipedia, the free encyclopedia

There was lots of ugliness and complications after the failure.

Martha, I never said no insurance company has failed. Why oh why do I keep getting misquoted? I said that according to my research, no one has ever not gotten back their invested dollars.
For the record, there have been quite a few failed insurance companies over the years. I believe there have bee more than one company out of Canada that failed.
One more time, IF an insurance company does fail, your investment dollars are kept in a separate account. It is the guarantee that MAY become questionable from that point.

 

[Art G]

The second part of that paragraph seems to be a very good example of you using a broad brush which you denied doing in the first part
A number of people have stated that VAs have a place for some people. I myself have. I have also stated it isn't right for me and why.

So let me get this straight, with your VA I get to lock in the peak value at any time, have no limit on the upside but can never loose money.
Are their any withdrawal penalties? What are ALL the fees. I know you mentioned the 2%, is that one time, or annual and what are other fees?
Or, is their a prospectus on the internet you can link to.
You really sound like a used car salesman, and it frankly is sounding too good to be true. So if you want to show me the evidence, I'll do the research to see what the real story is.

Zathras, first off, I don't have "my" insurance company". There are many different products and they offer different benefits with their own little twist. Some people are in need of income for life and could care less about leaving anyone anything. In that case, I might suggest one product. On the other hand, some people are ONLY worried about leaving money for their heirs, and for that there is something else.
If I were trying to sell anything, I'd have a link and means to reach me. In fact, I probably have become overly protective of the product because so many choose to attack it. As I've mentioned, it's just one part of investing worth looking into for some people.
So, with that said, I'll try to answer your questions.....

.....actually, I started typing out your answers then changed my mind. I'd prefer not to discuss products publicly, as I don't want to cross over any questionable lines as to advertising or soliciting. If you care to, you can send me a PM and I'll try to answer your questions, although I don't want them reprinted publicly. I'd suggest instead you do seek out someone you feel you may be able to trust in the industry. Again, I'm not here to solicit clientele.

 

[Martha]

Martha, I never said no insurance company has failed. Why oh why do I keep getting misquoted? I said that according to my research, no one has ever not gotten back their invested dollars.
For the record, there have been quite a few failed insurance companies over the years. I believe there have bee more than one company out of Canada that failed.
One more time, IF an insurance company does fail, your investment dollars are kept in a separate account. It is the guarantee that MAY become questionable from that point.

I did not mean to imply that you said no insurer failed. If you poke around about Executive Life you will see that it took years for payouts and policy holders and annuity holders were not all made whole.

 

[Zathras]

.....actually, I started typing out your answers then changed my mind. I'd prefer not to discuss products publicly, as I don't want to cross over any questionable lines as to advertising or soliciting. If you care to, you can send me a PM and I'll try to answer your questions, although I don't want them reprinted publicly. I'd suggest instead you do seek out someone you feel you may be able to trust in the industry. Again, I'm not here to solicit clientele.

Fair enough, I wouldn't want you to cross any lines either

 

[Art G]

I did not mean to imply that you said no insurer failed. If you poke around about Executive Life you will see that it took years for payouts and policy holders and annuity holders were not all made whole.

I believe each State has its own separate rules regarding the handling of failed insurance. I'd be happy to read any info you may find that states some weren't made whole. I'd like the info to present to some who have told me otherwise.

 

[Martha]

I believe each State has its own separate rules regarding the handling of failed insurance. I'd be happy to read any info you may find that states some weren't made whole. I'd like the info to present to some who have told me otherwise.

California State Auditor - Report 2005-115.2 Summary

In August 2005 the department estimated policyholder losses at $936 million, which equates to policyholders recovering 90 percent of their original policy rights. Including factors not considered by the department, we estimated policyholder economic losses of $3.1 billion as of August 2005, with policyholders recovering 86 percent of their expected ELIC account values.

 

[Art G]

California State Auditor - Report 2005-115.2 Summary

In August 2005 the department estimated policyholder losses at $936 million, which equates to policyholders recovering 90 percent of their original policy rights. Including factors not considered by the department, we estimated policyholder economic losses of $3.1 billion as of August 2005, with policyholders recovering 86 percent of their expected ELIC account values.

Well thanks for finding that. I just read through it and if I'm understanding it right, all the money was covered by reinsurance, although, they argue over the time value of the money. And it discusses only life insurance policies and there's no mention of annuities.
I have printed out the article and I will look into it further though.

 

[haha]

Well, right from the horses mouth.....

Hey, Suze is no horse. She is a gentle breeze of Long Island, available without the need to travel. May she live long and prosper.

Ha

 

[Martha]

Well thanks for finding that. I just read through it and if I'm understanding it right, all the money was covered by reinsurance, although, they argue over the time value of the money. And it discusses only life insurance policies and there's no mention of annuities.
I have printed out the article and I will look into it further though.

CuppaJoe can tell you more about how the annuity holders were treated. IIRC, the annuity contracts were sold and then there were problems with the buyer and the contract holders had a hard time getting money. I also think that the large annuity holders did not get paid in full. I do know that the state guaranty funds for annuities have dollar limits, usually around $100,000. When evaluating risk a person should know that dollar limit.

 

[Art G]

Well it looks like California is the one state where it's not all guaranteed....

State Guarantee Funds

 

[Martha]

Well it looks like California is the one state where it's not all guaranteed....

State Guarantee Funds

Thanks for the chart. I see California is the only one to have a percentage limit on top of a dollar limit. The rest of the listed states have a dollar limit as I mentioned above.

 

[Art G]

Yes you did, and the limits shock me. I need to research this further and see exactly what the limitations mean.

 

[Rich_by_the_Bay]

Scott Burns and Living Benefits

Scott Burns on variable annuities. This is the most lucid explanation I've run across as to how the money flows, and why he is not in favor of them:

The problem with living benefits

 

[Art G]

Well thank you Scott Burns, just two flaws I saw immediately....
1. If you die tomorrow, that immediate annuity is gone
2. That 10 year growth rate is wrong as every company I know of, doubles your income based amount after 10 years at most. So you're working with $200k, not $162k.

Then of course there's that CD like fixed income product he mentions paying 5%. He neglected to mention the loss of opportunity for it to grow to a much higher rate. So he's comparing a best case scenario to worst case with the VA.
Oh yeah, not to mention the loss of opportunity of quarterly lock in values.

 

[FinanceDude]

Well thank you Scott Burns, just two flaws I saw immediately....
1. If you die tomorrow, that immediate annuity is gone
2. That 10 year growth rate is wrong as every company I know of, doubles your income based amount after 10 years at most. So you're working with $200k, not $162k.

Then of course there's that CD like fixed income product he mentions paying 5%. He neglected to mention the loss of opportunity for it to grow to a much higher rate. So he's comparing a best case scenario to worst case with the VA.
Oh yeah, not to mention the loss of opportunity of quarterly lock in values.

Are you going to write him and ask him to defend his position? Maybe Moshe should write him and ask him to defend his position..........

 

[Art G]

Already did.

The problem with living benefits

 

[FinanceDude]

Already did.

The problem with living benefits

$20 bucks says he doesn't answer back.........

 

[Art G]

He did once before on his site. He admitted that American Funds were a fair inexpensive fund family. He does feel the need to defend himself on his home turf.

 

[2B]

$20 bucks says he doesn't answer back.........

I've actually had a fair number of exchanges with Scott. He's written some things I disagreed with and some where I wanted clarification.

What Art better watch out for is that Scott has taken letters in the past from financial planners/annuity salespeople and published then in a column. He then devoted the rest of the column to why these people are uninformed about their own product or lying.

 

[Art G]

LOL! Not the first time I've taken on Scott. Let him take a shot at responding. It might be educational for all. It's very easy to take a worst case from here and another one from there and paint a pretty bleak picture.
Look at it this way, with many of you around here taking shots at VA's, the only real objection just keeps coming back to "cause we heard they were bad". No one has come up with a substantiated reason as to why they're a worse place to be right now than mutual funds.

 

[FinanceDude]

I've actually had a fair number of exchanges with Scott. He's written some things I disagreed with and some where I wanted clarification.

What Art better watch out for is that Scott has taken letters in the past from financial planners/annuity salespeople and published then in a column. He then devoted the rest of the column to why these people are uninformed about their own product or lying.

I'll bet he's doing a LOT less of that now that he is an advisor, someone could point out the fallacy of being an advisor and telling everyone how THEY are lying, but NOT him...........

 

[2B]

I'll bet he's doing a LOT less of that now that he is an advisor, someone could point out the fallacy of being an advisor and telling everyone how THEY are lying, but NOT him...........

I'm not interested in paying their fees to put my money into their version of index funds. I know Scott is a part owner in the firm but I don't know if he is one of the "advisors." His columns have been scrupulously clean as far as endorsing them or their products. He has continued to write about and openly endorse several DIY couch potato approaches. I haven't seen the slightest hint of Scott openly going over to the "other side" as far as his columns and books are concerned.

Heck, given the right circumstances, I might even become a FA.

I have seen several articles on Asset Builder by the "active" manager that uses Scott's articles to bolster their claims.

Asset Builder came out with the "new and improved" asset allocator with a new commodity based index fund. They showed how that if an investor had used this fund for 5% of their assets they would be so much better off earlier in the year. Of course, the fund wasn't available until about the first of the year when the commodity boom was well underway. It was a classic case of data mining to re-caracterize their investment returns to look better than anyone would have gotten following their prior advice.

 

[FinanceDude]

I'm not interested in paying their fees to put my money into their version of index funds. I know Scott is a part owner in the firm but I don't know if he is one of the "advisors." His columns have been scrupulously clean as far as endorsing them or their products. He has continued to write about and openly endorse several DIY couch potato approaches. I haven't seen the slightest hint of Scott openly going over to the "other side" as far as his columns and books are concerned.

Fora someone as anal as you, your above paragraph surprises me. So, as long as he collects big fees from investors he remains "clean"?

Asset Builder came out with the "new and improved" asset allocator with a new commodity based index fund. They showed how that if an investor had used this fund for 5% of their assets they would be so much better off earlier in the year. Of course, the fund wasn't available until about the first of the year when the commodity boom was well underway. It was a classic case of data mining to re-caracterize their investment returns to look better than anyone would have gotten following their prior advice.

And you still trust Scot Burns...amazing!!

 

[2B]

Fora someone as anal as you, your above paragraph surprises me. So, as long as he collects big fees from investors he remains "clean"?



And you still trust Scot Burns...amazing!!

He's upfront with his part ownership in the firm. He doesn't use his forum to generate business. I'm sure some people are swayed by his stature and will use their services. I do find it somewhat amusing that a major champion of DIY investing for several decades would get involved with an FA firm.

The commodities fund came in from their "parent," DFA. The firm just markets these specially crafted index funds. That's just part of their responsibilities as franchisees.

I don't intend to let them manage my money. I see nothing different in the approach Scott has taken in his articles. I don't agree with everything he says all of the time but I recommend his archive of Couch Potato articles to any potential converts to DIY investing.