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Old 10-09-2013, 09:08 PM   #61
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Interesting info. Where did you get it?

My point was that insurance failures were modest during the recent financial crisis. The banks - a whole different story.
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It has been know for years. I guess there must be info on them on line.
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IOW, no source available...
Google. The link, and the referenced quote, are below.

Safety - Keeping Your Principal Safe

Annuity guaranteed cash values up to state guaranty funds limits - usually $100,000 - have been protected when an insurer fails. Is an annuity as safe as an FDIC insured bank account? No, because federally insured is by definition superior to a state guaranty. But the real question is not whether FDIC is safe; it is whether money inside a fixed annuity is also safe. From 1994 through 2008 there were 94 bank failures. CD deposits within federal deposit insurance limits were protected; the same did not hold true for account balances over the insurance limits in many of these banks and not every uninsured account was made whole.

During the same period customers of a little over a dozen interstate carriers that offered annuities received cash from state guarantee funds. Every state guaranty fund covered at least $100,000 of cash value in the event of carrier insolvency.
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Old 10-10-2013, 04:14 AM   #62
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There is an exception to almost every rule.
A friend bought a VA several years ago, in a retirement account, and it seems to be working. In a retirement account, because the objective was a guaranteed income stream, and withdrawals from a retirement account are taxed at ordinary income rates, so no loss of cap gain taxation. Seems to be working, because while the market plummeted in 2008-09, her annuity was guaranteed to double its income base in ten years. While her current cash value hasn't grown much, the income base is compounding at over 7% per year. There was also some sort of death benefit step up, might have been at the same 7%. At ten years, she will be 70. She will then take 7% of her doubled value for the rest of her life.
Unfortunately for you, this annuity is no longer offered. Insurance companies have reduced rates they guarantee. Btw, the company is Met. Annuities aren't a huge part of their business, and seems very likely to be able to follow thru on their guarantees.
But in general, I agree with most posters. Look very closely before proceeding, or don't bother to look at all at variable annuities. Because they are so complicated, and even the agent probably doesn't really understand it, you'd need to either be very sophisticated to understand, or need a savvy third party to evaluate for you.
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Old 10-10-2013, 06:34 AM   #63
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I'll make a few comment on the state guarantees. It isn't guaranteed by the state (not full faith and credit) but by the insurance companies that operate in the state that sell that type of insurance. The penalty for a company not participating in a guarantee fund of the failed company is typically to be banned from marketing that type of insurance in the state. I don't think any company has failed to participate but I don't know for sure. I believe that no one has not received their insurance benefit based on the individual states' rules.

The guarantee is also only on the benefits being paid. If your HI company fails, your insurance ends. No other company is forced to take you. This isn't as significant now with the ACA. Principle guarantees are also not covered. All those fancy VA riders are between you and the original company. That guaranteed income stream my not be what was originally promised with another company taking over.

Also, the guarantee value is absolute. Most states have a $100,000 limit but some states have $200,000. I've never heard of the guarantee covering more than that so putting more than that or have a VA balance grow to above that is outside the state guarantee.
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Variable annuities
Old 10-11-2013, 07:55 AM   #64
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Variable annuities

Since variable annuities are not popular on this forum, I 'd like to give folks the opportunity to be a little more specific. I have been pitched by a very good friend the Prudential Premier Retirement Annuity L Series. Any one have an specific or personal experience with this product?

Thanks
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Old 10-11-2013, 08:21 AM   #65
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Since variable annuities are not popular on this forum, I 'd like to give folks the opportunity to be a little more specific. I have been pitched by a very good friend the Prudential Premier Retirement Annuity L Series. Any one have an specific or personal experience with this product?

Thanks
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Old 10-11-2013, 08:21 AM   #66
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Originally Posted by Severinooh View Post
Since variable annuities are not popular on this forum, I 'd like to give folks the opportunity to be a little more specific. I have been pitched by a very good friend the Prudential Premier Retirement Annuity L Series. Any one have an specific or personal experience with this product?

Thanks
Go to page 10 of the prospectus ( http://www.annuities.prudential.com/....pdf?siteID=25 ).
Have a look at expense examples for L class.
If you invested $10000 with them, they will have $6374 of it at 10 years mark, regardless if you surrender or annuitize it.
Do you still think this it's a good deal for you? (Hint: it's a great deal for the salesman and insurance company)
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Old 10-11-2013, 08:23 AM   #67
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Would it be possible for us to invite an annuity salesperson to be a guest on this forum, and to go through the details of their product and allow the members to ask questions? I suspect they will have a very hard time convincing anyone, but why not give them a chance to explain why they think the product could be of benefit to us? If nothing else, it could be highly entertaining.
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Old 10-11-2013, 08:28 AM   #68
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Originally Posted by Severinooh View Post
Since variable annuities are not popular on this forum, I 'd like to give folks the opportunity to be a little more specific. I have been pitched by a very good friend the Prudential Premier Retirement Annuity L Series. Any one have an specific or personal experience with this product?
No personal experience other than noting the prospectus for the product is 165 pages long. Prospectuses - Prudential Annuities

Are you really comfortable investing your money in a financial product that requires 165 pages to define? A document that contains complex formulas and examples, like this one?

Quote:
Example of Positive MVA

Assume that at the time you request the withdrawal, the crediting rate associated with the fixed allocation maturing on the Maturity
Date is 4.00% (J = 4.00%). Based on these assumptions, the MVA would be calculated as follows:

MVA Factor = [(1+I)/(1+J+0.0025)]^(N/12)
= [1.055/1.0425]^(2)
= 1.024125
Unadjusted Value = $58,712.07
Adjusted Account Value after MVA = Unadjusted Value X MVA Factor = $60,128.47

Example of Negative MVA

Assume that at the time you request the withdrawal, the crediting rate associated with the fixed allocation maturing on the Maturity
Date is 7.00% (J = 7.00%). Based on these assumptions, the MVA would be calculated as follows:

MVA Factor = [(1+I)/(1+J+0.0025)]^(N/12)
= [1.055/1.0725]^(2)
= 0.967632
Unadjusted Value = $58,712.07
Adjusted Account Value after MVA = Unadjusted Value X MVA Factor = $56,811.69
Have you read the prospectus thoroughly and do you fully understand what you would be purchasing and the combined fees you will be paying? If you can answer yes and still think the product is something you need, buy it.
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Old 10-11-2013, 08:32 AM   #69
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Would it be possible for us to invite an annuity salesperson to be a guest on this forum, and to go through the details of their product and allow the members to ask questions? I suspect they will have a very hard time convincing anyone, but why not give them a chance to explain why they think the product could be of benefit to us? If nothing else, it could be highly entertaining.
We've had countless annuity salesmen show up on the forum to defend their product. None have lasted more than a few days.

I guess we're not a very hospitable group...
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Old 10-11-2013, 08:47 AM   #70
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We've had countless annuity salesmen show up on the forum to defend their product. None have lasted more than a few days.

I guess we're not a very hospitable group...
Yup. Much like the snake oil salesmen of old, when pressed for details and specifics, they find it easier to just move on and find victims look for new business elsewhere.
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Old 10-11-2013, 09:08 AM   #71
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....... I have been pitched by a very good friend ......
Hmmmm, some friend. Since he is a good friend, look him hard in the eye and ask him what his commission will be.
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Old 10-11-2013, 09:52 AM   #72
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Go to page 10 of the prospectus ( http://www.annuities.prudential.com/....pdf?siteID=25 ).
Have a look at expense examples for L class.
If you invested $10000 with them, they will have $6374 of it at 10 years mark, regardless if you surrender or annuitize it.
Do you still think this it's a good deal for you? (Hint: it's a great deal for the salesman and insurance company)
Contrast that $6374 charge after ten years with Vanuard S&P500 Investor class of $217. "Security", "an income you cant outlive", or whatever they are trying to sell you, has quite a high price.
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Old 10-11-2013, 10:01 AM   #73
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We've had countless annuity salesmen show up on the forum to defend their product. None have lasted more than a few days.

I guess we're not a very hospitable group...
Some have been honest in saying they were and some have been trolls that were eventually exposed.
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Old 10-11-2013, 10:07 AM   #74
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Some have been honest in saying they were and some have been trolls that were eventually exposed.
True, and neither strategy resulted in a successful defense of an indefensible product. (Note we are referring to the many pseudonyms for variable annuities here, not about SPIA's.)
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Old 10-11-2013, 10:23 AM   #75
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Hmmmm, some friend. Since he is a good friend, look him hard in the eye and ask him what his commission will be.
Personally, I don't see the value in this.

First, when I purchase something, my concern is if the price I am paying fits the value I expect the product to deliver. If I'm comparing two refrigerators, I look at many things, but I don't bother trying to evaluate the sales persons commission. My out of pocket is what I care about.

Second, these annuity sales people are likely prepared with all sorts of round-a-bout answers. What's the point? And if he/she delivers a superior product (note I said "IF"!), then he//she deserves a great commission.


So like others have mentioned, just try to understand and evaluate the product. That should be enough to dissuade a purchase, and question just how good of a friend this person is. Well, they may be a good friend, but like most of us, they need to put food on the table. Your table is likely secondary to that.

-ERD50
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Old 10-11-2013, 10:26 AM   #76
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True, and neither strategy resulted in a successful defense of an indefensible product. (Note we are referring to the many pseudonyms for variable annuities here, not about SPIA's.)
I agree that the VA type products are indefensible.

I personally would not take money and buy a SPIA especially at the current interest rates. When I've looked at them, the payout seems to be based on the purchaser living around 5 to 10 years longer than their mortality table predicts (mean). I did have a small pension offer to cash-out with a lump sum. I didn't take the cash because if I went to Vanguard for pricing the lump sum would only buy about 2/3 of my pension.
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Old 10-11-2013, 10:29 AM   #77
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Second, these annuity sales people are likely prepared with all sorts of round-a-bout answers. What's the point? And if he/she delivers a superior product (note I said "IF"!), then he//she deserves a great commission.
As we all know that in the world of financial products the superior products are only those with very small or non-existent commissions.
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Old 10-11-2013, 10:50 AM   #78
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Go to page 10 of the prospectus ( http://www.annuities.prudential.com/....pdf?siteID=25 ).
Have a look at expense examples for L class.
If you invested $10000 with them, they will have $6374 of it at 10 years mark, regardless if you surrender or annuitize it.
Do you still think this it's a good deal for you? (Hint: it's a great deal for the salesman and insurance company)
Over 10 years at 5%, $10k compounds to $16.3k, if you pay $6374 in expenses your return is zero. If you bought an index mutual fund with an ER = 0.1% instead your annual return would be 4.9% and you'd end up with $16.1k. That's a lot to pay for "guaranteed income".

The only VA I'd ever consider (I actually have some) are those from TIAA-CREF, they are part of university retirement schemes. Some have ER's of 0.4%, but I also have a chunk of money in TIAA-Traditional which is a deferred annuity currently paying 4.38% interest with a minimum guarantee of 3%. The fees are never quoted as I presume they are taken out prior to declaring the interest rate.
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Old 10-12-2013, 06:33 AM   #79
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Over 10 years at 5%, $10k compounds to $16.3k, if you pay $6374 in expenses your return is zero. If you bought an index mutual fund with an ER = 0.1% instead your annual return would be 4.9% and you'd end up with $16.1k. That's a lot to pay for "guaranteed income".

The only VA I'd ever consider (I actually have some) are those from TIAA-CREF, they are part of university retirement schemes. Some have ER's of 0.4%, but I also have a chunk of money in TIAA-Traditional which is a deferred annuity currently paying 4.38% interest with a minimum guarantee of 3%. The fees are never quoted as I presume they are taken out prior to declaring the interest rate.
Nun-As I recall, your AA and investing approach are relatively conservative, which, I presume, is the reason you own annuities. Without revealing any private details, I'd like to know what annuities you purchased, why you purchased them, if they're performing the function intended, and if you'd make the same decision in today's low rate environment. Thx.
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Please Listen to Running Bum
Old 10-12-2013, 07:54 AM   #80
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Please Listen to Running Bum

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Watch out for high fees, and return of capital masked as part of the annual return rate.

How about a Target Retirement Fund from a low cost company like Vanguard or Fidelity? You could just invest and forget. Or even a simple mix of a total stock market, total international, and total bond fund should take very little of your time to manage and can be done anywhere you have internet access. Rebalance once a year or even less often.
It only took me about 20 years to learn what he is telling you in just one post.

The short version of my story: back in the '90's I was so busy teaching, doing all the extra-curriculars teachers are asked to do, child-rearing, and then planning a move to Ohio with my husband, that I had little time to figure out that a variable annuity was not serving my future interests. However, I did want to shelter income in a 403B, and VA's were all that were available through my school district.

After we moved, and I had time to learn more, I wanted to move that 403b money into investments with lower fees. Nope, couldn't do that, unless I wanted to pay 7% in surrender charges. So, trying to make the best of the situation, I spent the next 7 years managing the sub accounts to make as much profit as possible. But never could figure out why those fees were higher than what I would have been charged at places like Fidelity or Vanguard. Through Scott Burns and various investment writers, the high cost of insurance products became obvious. When my 7 years were up, I was able to roll that $ over into IRAs that have performed much better.

Now, my sister-in-law is in a VA of the type the OP describes. After poring through the half-pound book provided by that insurance company, she and I can see that she's paying about 2% a year just to keep her $ there, PLUS an additional average of about 1.5% on each of her sub accounts. She's making very little $ on this venture; plus, when she signed up, the insurance agent said nothing about a 7% surrender charge. (She didn't ask.) When I asked her about it, we again dug through that half-pound book: yup, there it was. It would cost her 7% to change her mind and get out of this product.

It would have been nice if I could have "gotten to her" before she made this decision..........but she was in the middle of family crises my husband and I were trying to help her with. Her financial challenges had been on the sidelines when she trusted an insurance agent with her fears about her future. I wish I could have saved her the high cost of that VA.

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