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Prudential Red Zone Product
Old 06-05-2011, 08:30 AM   #1
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Prudential Red Zone Product

Hi,

I'm new to this blog, and need some advice. Does anyone know about Prudential's IRA Annuity? According to them, this product locks in on guaranteed 5% and will let me take out 5% for life.

Thanks for anybody that has heard of this
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Old 06-05-2011, 08:34 AM   #2
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A simple question.

Does that "5%" include a return of "your money" (e.g. the preimum)?

If so, your actual yield (e.g. earnings) is much less...

I would recommend running an IRR spreadsheet showing your original premium, your annual "check", and the period of guaranteed payments, which also includes life payments (not all contracts are written this way, but for your own financial protection, you should look at a contract in this manner).

The spreadsheet will tell you what your actual return is - not what the company advertises. There is a difference...
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Old 06-05-2011, 03:52 PM   #3
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Wow, a financial product named after an underarm deodorant...guess that should help cover up the smell of the annuity...
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Old 06-05-2011, 05:56 PM   #4
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I thought Retirement Red Zone was a Prudential trademark. Once they have a lock on calling the years just before retirement a term that no one else is allowed to use, they can call themselves the Red Zone specialists and their marketing department will be richly rewarded.
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Old 06-05-2011, 08:22 PM   #5
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Wow, a financial product named after an underarm deodorant...guess that should help cover up the smell of the annuity...
Now look at your 401k, now look at me, now look at your 401k, now look at me. I'm the annuity you wish your 401k could be. Now look back at your 401k. Now look at me. I'm on a horse.
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Old 06-06-2011, 09:03 AM   #6
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I don't know about that specific product. Have you compared it to other similar annuities from other providers? You may find that it's a good deal. Prudential is the custodian for my tax-deferred retirement savings plan at w*rk, and earlier this year I asked for an annuity quote because I'm thinking of taking a partial lump sum option from my DB pension when I retire. I was quite surprised to find that for same age and purchase amount, the monthly payout of the Prudential annuity was higher (by $40-$60 IIRC) than other quotes I got online. This is despite the fact that the Prudential annuity was single life with 5 year period certain (a straight single life annuity is not available via our plan) and the other quotes were single life with no period certain. I'm still not decided whether to do this or not, and if I do I might roll the lump sum over to an IRA custodian if that makes it possible to get an inflation-adjusted annuity, which is also not available via our retirement plan.
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Old 06-06-2011, 01:06 PM   #7
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There are other fixed annuities that offer a much better guaranteed income benefit if that's what you're after.
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Old 06-06-2011, 03:29 PM   #8
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Originally Posted by CaliforniaVA View Post
Hi,

I'm new to this blog, and need some advice. Does anyone know about Prudential's IRA Annuity? According to them, this product locks in on guaranteed 5% and will let me take out 5% for life.

Thanks for anybody that has heard of this
I'd guess this is a variable annuity with a guaranteed lifetime income benefit. Maybe this: Retirement Red Zone - Modern Variable Annuities - Innovative Retirement Solutions

The alternative investment is a traditional SPIA with part of your money, with the rest invested in low load indexed funds.

The key question is whether you really want a non-COLA'd annuity. If so, then you want to look at the loads in the VA.

Most people here will say that when they've looked at the loads in VAs, they've found better alternatives.
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Old 06-06-2011, 03:41 PM   #9
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Quote:
Originally Posted by CaliforniaVA View Post
Hi,

I'm new to this blog, and need some advice. Does anyone know about Prudential's IRA Annuity? According to them, this product locks in on guaranteed 5% and will let me take out 5% for life.

Thanks for anybody that has heard of this
When Pru speaks of guarantees, they are talking about an income base, a base value calculated by the insurance company that you CAN NOT withdraw in a lump sum. If you take the riders and the "guarantees", your internal cost is about 3.5-3.75% per year.. So, the insurance company is not really on the hook at all..........
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Old 06-06-2011, 03:42 PM   #10
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There are other fixed annuities that offer a much better guaranteed income benefit if that's what you're after.
6% fixed annuities? And NOT Equity Index annuities? Do tell, I have a bunch of folks that could use those! Of course, 15 or 20 year surrenders are out of the question..........
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Old 06-06-2011, 03:50 PM   #11
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6% fixed annuities? And NOT Equity Index annuities? Do tell, I have a bunch of folks that could use those! Of course, 15 or 20 year surrenders are out of the question..........
Re-read what I said. Guaranteed income is based on the "income base" and 5% with 5% withdrawal rate (assuming >age 60) is a very low number compared to what else is out there. The best income-guarantee annuities are usually optional riders attached to fixed index products. I never said anything about >5% fixed annuity cash value interest rates.
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Old 06-06-2011, 05:00 PM   #12
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Milevsky grades VAs. This article give his opinion on another companies product...

While it is not the pru product... it shows what he thinks is important.

Jackson National


In this article... he discusses the potential benefit of an unrestrained allocation of premium to any fund.

Quote:
Rather, the main feature that caught my eye is the elimination of any asset allocation or risk restrictions in their sub-accounts. You can invest however you want. Indeed, Jackson offers 99 different investment funds, and they are all fair game. Just to make this crystal clear, the product provides the ability to allocate 100 percent of your VA sub-accounts to any of the 99 options available and shoot for the fences with your protected portfolio. Thus, if you so desire, you can allocate the entire premium to a Small Cap Index Fund, say, or the International Index Fund. No restrictions, no forced models and no forced re-allocations. This is rare and valuable.
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Old 06-07-2011, 12:14 PM   #13
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Note that the Prudential product I found seems to give the company the right to move your money around to decrease their perception of their risk from the income guarantee. See the fine print in the link.

Also, the 125 basis point load in the Jackson national product is, as for any VA, in addition to the loads on the underlying mutual funds.
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Clarificationo on Red Zone terminology
Old 06-12-2011, 08:51 AM   #14
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Clarificationo on Red Zone terminology

I once briefly worked in marketing for Pru Annuities.

The Red Zone terminology is simply a marketing term used to describe the 5 years immediately preceding retirement and the 5 years immediately following retirement to emphasize the critical importance of these periods and their impact on your nest egg. Badly timed stock market fluctuations right before you retire will do a number on your retirement savings and poor market performance in the early years of your retirement could also quickly eat away at savings.
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