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Old 05-10-2010, 05:36 PM   #21
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How convienient

So I would bet that the sales guy led the poster rsingh6675 to believe that the 8% and 10 % guaranties were for cash accumulation. I'll bet that is the understanding that rsingh6675 has.

So the guaranties are only for an initial 10% and then 8% more income of a perhaps less (perhaps much less) than steller annuity.

My conclusion is the same - Steer away from this stuff. It isn't a good deal for you.
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Old 05-10-2010, 05:45 PM   #22
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So I would bet that the sales guy led the poster rsingh6675 to believe that the 8% and 10 % guaranties were for cash accumulation. I'll bet that is the understanding that rsingh6675 has.

So the guaranties are only for and initial 10% and then 8% more income of a perhaps less (perhaps much less) than steller annuity.

My conclusion is the same - Steer away from this stuff. It isn't a good deal for you.
Probably, and that's the difference between a good agent and a bad one. To keep it (relatively) simple:

You have two buckets. One has a cash value. One has an income value.

On the income bucket:

The initial principle, let's say $100k, gets a 10% bonus to make its value $110k. It is then guaranteed to grow at 8% per year for however many years the contract guarantees it (probably 8-10 years). You can start taking income at any time for the rest of your life at a certain percentage of that income value. This number is probably somewhere between 4.5-6% depending on your age. So if you have $100k, you can take out ~$5k a year for life. If you have $300k, you can take out ~$15k/year for life. The longer you wait to trigger the income, the higher your payout is for life, especially while still in the compounding interest period. Be careful though, some of these only give simple interest instead of compound.

On the cash bucket:

Your initial principle may have some sort of smaller bonus. Let's say it doesn't and you have $100k. This side operates more like a traditional ELIA and accumulates based on the S&P (or other market index) return, with a capped rate and a guarantee to not decrease. Caps have gone way down in recent years, making this less attractive. If at the end of your 8 or 10 year contract you want to just walk away, you can take whatever has accumulated in the cash bucket and never look back. There is no cash penalty for doing this. You can also withdraw up to 10% per year with no cash penalty.


Here's the rub: If you start taking lifetime income from the income bucket, it reduces your cash accumulation bucket by the same amount. When your cash accumulation bucket reduces to $0, you have nothing left to walk away with, but can still continue taking that guaranteed income for the rest of your life.

Note - this is NOT annuitizing the contract. If you die after you start taking let's say one year of income, your beneficiary receives the remaining cash accumulation value (e.g. the original accumulated value minus one year of income). The beneficiary can also sometimes choose to take the income value over 5 years instead of the cash value in a one-time lump sum. If you had annuitized the contract for a lifetime pay and died in year one, you would have nothing left and be totally screwed. This gives you a way around that.

Confused yet?
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Old 05-10-2010, 05:50 PM   #23
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I got it the first time.

I just hope that rsingh6675 gets it and understands what exactly they are peddling.

to rsingh6675: Note that the 8% income guaranty goes up mostly because you are older and will get fewer lifetime payments. Mostly they are just giving you your principal back over your lifetime. The real accumulation interest rate is far far lower.

My conclusion is the same - Steer away from this stuff. It isn't a good deal for you.

Quote:
Confused yet?
These products are confusing by design. They are often sold to people who don't quite understand what they are getting.

Quote:
Note - this is NOT annuitizing the contract. If you die after you start taking let's say one year of income, your beneficiary receives the remaining cash accumulation value (e.g. the original accumulated value minus one year of income).
I would differ with you there. I'd call it annuitizing the contract along with some life insurance (that you pay for).
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Old 05-10-2010, 05:53 PM   #24
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Fair enough. Even most people that know how ELIA's work don't understand the income riders.
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Old 05-10-2010, 08:01 PM   #25
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Is there something in my post that's incorrect? ART premiums often aren't guaranteed either. Here's an ART comparison for you on a 40 year old male, standard risk class:

30 year term - $2,220/year, fully guaranteed
No-lapse UL - $6,802/year, fully guaranteed for life

ART:

Year 1 - $425
Year 5 - $1535, up to maximum of $5035
Year 10 - $2245, up to maximum of $8265
Year 20 - $5285, up to maximum of $22,345
Year 30 - $19,525, up to maximum of $73,245
Year 40 - $77,945, up to maximum of $208,465


Yeah, ART is a great deal.
Your response was textbook agent: ignore any carrier risk (easier to sell whatever you please to the rubes) and pooh-pooh the simple product in favor of the vastly more complex (the better to sell the sizzle rather than the steak).
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Old 05-10-2010, 08:06 PM   #26
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Your response was textbook agent: ignore any carrier risk (easier to sell whatever you please to the rubes) and pooh-pooh the simple product in favor of the vastly more complex (the better to sell the sizzle rather than the steak).
If by "textbook agent" you mean "textbook common sense" I could agree with you. Who in the world would pay ART rates when guaranteed term insurance is so cheap? You'd have to be an absolute fool to buy ART these days. Not only that, but term insurance is about the most simple insurance product around!

AIG was an A++ carrier before they crashed and the same could very well happen again with another company if you are talking about 20-30 years down the line. Any A, A+, or A++ rated company will do just fine and there are many to choose from. If you want to pay higher rates from an A++ company, feel free. That's why I represent 40+ companies, so I don't have to be captive and drink the company kool-aid. If only I had a nickel for every consumer that thought they knew more than the insurance agent about insurance and tried to do it on their own thinking they were saving themselves a bundle of money
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Old 05-10-2010, 09:10 PM   #27
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Has anyone heard about Allianz Index Annuity? The sales guy has told me if I deposit $100K, they will add 10% in the first year. And then they will add minimum of 8% every year. I can start withdrawing 5-10% every year. Has anyone used Allianz or know about it?
Thanks.
Never heard of them, but look what Google found:
Quote:
A Minnesota jury found earlier this week, on Monday, October 12th, that Allianz Life Insurance Company used a misrepresentation or deceptive practice in the course of selling its two-tiered annuities by falsely promising in its pre-sale marketing materials that consumers would receive a 10% “upfront” bonus when they purchased those annuities. In reality, the class action complaint alleged, the bonus was not “upfront” and was not available to policyholders for 15 years, if ever.
But why even bother researching it. 10% the first year, 8% minimum all following years, and you can withdraw 5-10% a year forever? That's a Bernie Madoff kind of claim.
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Old 05-10-2010, 09:23 PM   #28
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Never heard of them, but look what Google found: But why even bother researching it. 10% the first year, 8% minimum all following years, and you can withdraw 5-10% a year forever? That's a Bernie Madoff kind of claim.
Allianz is one of the biggest annuity companies in the world. They have changed their products over the past couple years to be more in line with the rest of the industry in their offerings and to get rid of the image people have of the company, which is pretty much what you found on Google.
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Old 05-11-2010, 07:00 AM   #29
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Allianz is one of the biggest annuity companies in the world. They have changed their products over the past couple years to be more in line with the rest of the industry in their offerings and to get rid of the image people have of the company, which is pretty much what you found on Google.
But a swallow does not make a summer (as the priest said to the altar boy). Great, so this particular company pulled back some of its, um, "less transparent" offerings. But we are still talking about an entire industry that thrives on selling Byzantinely complex products to serve the relatively simple needs of its customers, most of whom seem to have little idea of what they are buying. Why is this? Its not hard to guess. The more complex the product, the easier it is to sell the sizzle rather than the steak (rsingh was clearly enticed), and the easier it is to bury inconvenient details in the fine print, both of which are routinely done with a less sophisticated customer base. The agents/distributors are (at the very least) complicit, as the complexity helps the sale and makes it easy to build in room for a fat commission structure. I think pretty highly of some parts of this industry, but it has failed woefully in serving its customers' interests in the case of investment products. Perhaps this is why life insurers and agents get sued so often...
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Old 05-11-2010, 07:40 AM   #30
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But a swallow does not make a summer (as the priest said to the altar boy). Great, so this particular company pulled back some of its, um, "less transparent" offerings. But we are still talking about an entire industry that thrives on selling Byzantinely complex products to serve the relatively simple needs of its customers, most of whom seem to have little idea of what they are buying. Why is this? Its not hard to guess. The more complex the product, the easier it is to sell the sizzle rather than the steak (rsingh was clearly enticed), and the easier it is to bury inconvenient details in the fine print, both of which are routinely done with a less sophisticated customer base. The agents/distributors are (at the very least) complicit, as the complexity helps the sale and makes it easy to build in room for a fat commission structure. I think pretty highly of some parts of this industry, but it has failed woefully in serving its customers' interests in the case of investment products. Perhaps this is why life insurers and agents get sued so often...
I agree with you. I see the same problem with health insurance. Every day I get fax blasts touting "Guaranteed health insurance!" for "Only $449/month for a family!" Of course, it's not really health insurance, it's just a health "plan" offering discounts and small re-imbursements. Try Googling "Mega life and health scam" and you can read all day....there's a ton of those companies out there, Mega is just the biggest. Pisses me off to no end to see consumers being completely taking advantage of, only to find out after they have a $50k hospital claim that they are totally screwed.
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