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Old 09-17-2007, 01:38 PM   #21
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First post here, hi everyone.

Just wanted to point out that this piece is not even approved for public consumption. Typically mutual fund/va pieces written by registered reps require regulator review. Obviously, this one hasn't.

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Old 09-21-2007, 08:41 AM   #22
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Originally Posted by Running_Man View Post
Could you name a few of the annuitities that have gone out of business and not been paid their customers out? I am aware of several situations where the annuity payments were temporarily slowed and % held back but in those cases annuity holders eventually got their money. Additionally most states provide insurance for up to $100,000 as far as I know.

I am personally aware of several individuals that took cash in lieu of pension and lost all their money, but noone that took an annuity and lost their money.
I'm not aware of any that have gone out of business recently. Unfortunately, I can't remember specifics. The last problem I can remember was some issues in the mid-80's where interest rates fell suddenly and companies that had written annuities based on the high interest rates of the 1970's didn't make it.

I am also not familiar with the level of insurance coverage. You mention $100,000 but is that annual payments, total payments or asset value? I don't know what happened to the annuitants of the failed companies but I remember some sad tales of old people eating cat food because of it. It was also Ronnie's fault.

As for lump sum or annuity pension, having the cash in your hand doesn't protect you from "stupid." I've seen people get large amounts of cash and not have any idea with how to invest and protect it for the future. It's the traditional lottery winner bankruptcy.

As for which to select, I've recommended for people to take both but I usually suggest the "lump sum." It all come downs to the interest rate used to calculate the annuity. Pension annuities are also backed indirectly by the US govt up to a certain amount. If the payment is below this cap, I'd say it's much safer than the typical private SPIA.

Unfortunately in our society, we are all well trained to spend and not save. The purpose of this forum is to help people to save and invest. If we can't do any better than steer people into SPIAs and VAs, we should just shut it down and find something else to talk about.

I may take a hiatus from my annuity posts and simply encourage people to buy them since my index funds have a lot of insurance companies in them that make a significant amount of their profits from annuities. By discouraging "marks," I'm costing myself money.
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Old 09-21-2007, 08:54 AM   #23
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I'm not aware of any that have gone out of business recently. Unfortunately, I can't remember specifics. The last problem I can remember was some issues in the mid-80's where interest rates fell suddenly and companies that had written annuities based on the high interest rates of the 1970's didn't make it.
Jackson National Life comes to mind. They got into hot water for DEMANDING that single premium whole life clients pay additional premium because the fixed income markets whipsawed them. DW's dad had one and he refused to send them more money. Eventually they paid a big fine and moved on.........

Interesting unrelated fact, during the great Depression, NOT ONE insurance company OR mutual fund company failed............

Quote:
I am also not familiar with the level of insurance coverage. You mention $100,000 but is that annual payments, total payments or asset value? I don't know what happened to the annuitants of the failed companies but I remember some sad tales of old people eating cat food because of it. It was also Ronnie's fault.
I am not aware of the state providing insurance for individual annuities, I think they might back up state pensions or something as an option. If Prudential fails, your annuity is NOT backed up by anyone.........

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Pension annuities are also backed indirectly by the US govt up to a certain amount. If the payment is below this cap, I'd say it's much safer than the typical private SPIA.
Definitely the case, but MOST Americans don't have a govt pension to rely on.........

Quote:
Unfortunately in our society, we are all well trained to spend and not save. The purpose of this forum is to help people to save and invest. If we can't do any better than steer people into SPIAs and VAs, we should just shut it down and find something else to talk about.
Agree, but with a caveat. If people DON'T SAVE, and DON'T LIVE LBYM, it really doesn't matter what products are out there, good or bad. They're screwed anyway.........

Quote:
I may take a hiatus from my annuity posts and simply encourage people to buy them since my index funds have a lot of insurance companies in them that make a significant amount of their profits from annuities. By discouraging "marks," I'm costing myself money.
I think one could buy the individual stocks of large insurers and get lost on Gilligan's Island for 20 years and still make money........
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Old 09-21-2007, 08:58 AM   #24
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I may take a hiatus from my annuity posts and simply encourage people to buy them since my index funds have a lot of insurance companies in them that make a significant amount of their profits from annuities. By discouraging "marks," I'm costing myself money.
Hey, good point. Might be a good idea to pump up annuities for our portfolio's benefit.
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Old 09-21-2007, 09:27 AM   #25
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I am not aware of the state providing insurance for individual annuities, I think they might back up state pensions or something as an option. If Prudential fails, your annuity is NOT backed up by anyone.........
Not true. Every state has a state guarantee fund that all the insurers doing business in the state pay into. In the event a failed insurers assets don't cover policyholder liabilities, the guaranty fund is supposed to make up the difference. Its a far cry from FDIC insurance, but t is something.

If you shop carefully and are choosy about the insurer, credit risk is de minimus. The problem is that annuities still tend to be a lousy deal for the buyer.
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Old 09-21-2007, 09:35 AM   #26
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That is the way the uber-weathy handle their money. They don't buy VAs.
.
No, they buy hedge funds, structured notes, TONS of life insurance, REITs, lease buyback programs, etc.

Most of them don't own a lot mutual funds either, they own individual stocks and muni bond ladders,etc.

They don't do many CD's either, they are tax sensitive folks.......
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Old 09-21-2007, 09:38 AM   #27
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Not true. Every state has a state guarantee fund that all the insurers doing business in the state pay into. In the event a failed insurers assets don't cover policyholder liabilities, the guaranty fund is supposed to make up the difference. Its a far cry from FDIC insurance, but t is something.
I'm sure it's as underfunded as FDIC, maybe more so. I'll look around for the numbers on FDIC, but in 2005 it had $97 billion to cover $4.4 TRILLION in assets.......

However, if all the large banks were to fail simultaneously, we'd have bigger problems than FDIC............
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Old 09-21-2007, 09:43 AM   #28
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I'm sure it's as underfunded as FDIC, maybe more so. I'll look around for the numbers on FDIC, but in 2005 it had $97 billion to cover $4.4 TRILLION in assets.......
But there is a big difference: FDIC insurance carries the full faith and credit of the feddle gumint. Insurance has the benefit of whatever is in the guaranty fund kitty and that's it. The full faith and credit means that I don't really care what the FDIC has as assets.
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Old 09-21-2007, 10:57 AM   #29
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But there is a big difference: FDIC insurance carries the full faith and credit of the feddle gumint. Insurance has the benefit of whatever is in the guaranty fund kitty and that's it. The full faith and credit means that I don't really care what the FDIC has as assets.
What about the fact that FDIC can negotiate settlements as long as 99 years to the policyholders? Granted, the chance is small....... Again, another caveat most folks who blindly trust FDIC have no clue about. I agree FDIC was needed to give folks trust in banks again, but I don't trust the govt to run any insurance company......

Seems like eveyone forgets the bail-out of the S&L industry a while ago............what a fiasco that was.................
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Old 09-21-2007, 11:20 AM   #30
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What about the fact that FDIC can negotiate settlements as long as 99 years to the policyholders? Granted, the chance is small....... Again, another caveat most folks who blindly trust FDIC have no clue about. I agree FDIC was needed to give folks trust in banks again, but I don't trust the govt to run any insurance company......

Seems like eveyone forgets the bail-out of the S&L industry a while ago............what a fiasco that was.................
Of course you should look at any bank carefully before making a deposit, but unless we are talking about a collapse of the banking system (and with it western society as we know it), FDIC insurance means depositors will be protected. One cannot say the same WRT insurance guaranty funds.
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Old 09-21-2007, 11:52 AM   #31
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Of course you should look at any bank carefully before making a deposit, but unless we are talking about a collapse of the banking system (and with it western society as we know it), FDIC insurance means depositors will be protected. One cannot say the same WRT insurance guaranty funds.
There is a similar system for federally chartered credit unions, whose exact name escapes me at the moment. Do you have any comments on the safety of the FCU protection system?
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Old 09-21-2007, 11:54 AM   #32
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There is a similar system for federally chartered credit unions, whose exact name escapes me at the moment. Do you have any comments on the safety of the FCU protection system?
Its fine. In general, credit unions are at least as safe as banks because they tend to be more conservatively run.
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Old 09-21-2007, 12:12 PM   #33
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I failed to check my facts before asking the question. The credit union where I have some money is Alliant Credit Union, which used to be the United Airlines Employees Credit union. They changed their name a couple of years ago because NOBODY wants to be associated with United Airlines these days. So far, the credit union's finances have been a whole lot better than the airline's.

They state that
"Alliant Credit Union is an Illinois chartered credit union, and as such, is under the supervision of the Department of Financial and Professional Regulation (DFPR) of the State of Illinois. Alliant's share savings accounts are insured by the National Credit Union Administration (NCUA), an independent agency of the federal government which administers the National Credit Union Share Insurance fund (NCUSIF). The NCUSIF is the strongest of the federal insurance funds.
..."

That gives me a headache, can anyone explain what it all means? And, would a CD or IRA CD be coverd by the insurance? They mention "share savings accounts", nothing else. Maybe it's all the same, maybe not.
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Old 09-21-2007, 12:15 PM   #34
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I think one could buy the individual stocks of large insurers and get lost on Gilligan's Island for 20 years and still make money........
Now, Mary Anne could probably sell me an annuity.
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Old 09-21-2007, 12:17 PM   #35
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That gives me a headache, can anyone explain what it all means? And, would a CD or IRA CD be coverd by the insurance? They mention "share savings accounts", nothing else. Maybe it's all the same, maybe not.
Yes, it would be covered by the insurance limits of the account. They are backed by the US govt but not as "secure" as treasury bonds/notes. Any account or CD would be covered unless they specifically identified it as a non-insured money market or brokerage account. They might have brokerage services available. If they do, don't use it.
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Old 09-21-2007, 12:24 PM   #36
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Seems like eveyone forgets the bail-out of the S&L industry a while ago............what a fiasco that was.................
The depositors were bailed out but hundreds of S&Ls shut their doors forever. Some were reconstitued with all the prior equity blown away to nothing.

The failed but resurrected S&Ls were stripped of their known bad debts and sold for next to nothing to investors. The "smart money" said they were bad investments and that they'd go broke again. I know one person that put a few hundred thousand into one in Oklahoma that got bought out for several million in profit to him just a few years later.
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