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Who protects annuities if the insurer fails?
09-15-2008, 08:42 AM
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#1
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Full time employment: Posting here.
Join Date: Oct 2007
Location: New York
Posts: 898
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Who protects annuities if the insurer fails?
AIG sure has sold a lot of those things.
I've heard that most states limit recovery of annuities to 100k of present value.
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09-15-2008, 08:45 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Posts: 12,483
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Quote:
Originally Posted by Maurice
AIG sure has sold a lot of those things.
I've heard that most states limit recovery of annuities to 100k of present value.
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That's pretty much it, THEY (the insurer) is on the hook to "guarantee" the funds.....
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Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
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09-15-2008, 08:53 AM
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#3
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Full time employment: Posting here.
Join Date: Oct 2007
Location: New York
Posts: 898
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So annuity buyers can get screwed twice?
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Money's just something you need in case you don't die tomorrow.
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09-15-2008, 08:56 AM
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#4
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Moderator Emeritus
Join Date: Dec 2002
Location: Oahu
Posts: 26,860
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Quote:
Originally Posted by FinanceDude
That's pretty much it, THEY (the insurer) is on the hook to "guarantee" the funds.....
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You'd think that even AIG would lay off some annuity reinsurance.
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09-15-2008, 09:02 AM
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#5
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Thinks s/he gets paid by the post
Join Date: Mar 2006
Location: Houston
Posts: 4,337
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Quote:
Originally Posted by Nords
You'd think that even AIG would lay off some annuity reinsurance.
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I'm sure Lehmans would sell them some.
This is the little spoken of risk with annuities. Ultimately, you are a creditor of the insurance company. In some cases you "own" high fee mutual funds in a VA but not always. If they do fail, all of your "guarantees" to not lose money and all the other promises go away. Even your smiling annuity salesman goes away.
I'm sure as of 6 months ago no one would have even considered AIG would need to "restructure."
I've run across an occasional person that has lost money in an annuity. One guy had a $10,000 per year payout that was restarted after about 2 years of legal hassles at about $1,000 per year.
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The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
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09-15-2008, 09:03 AM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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I read an article a few months ago about insurance companies not having the assets to cover the annuities if the market went south. From what I remember there is fine print in the contracts saying that you would only get a certain minimum, and therefore the "guarantees" aren't really guaranteed. I'll see if I can find it again.
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09-15-2008, 09:06 AM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
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09-15-2008, 09:08 AM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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Quote:
Originally Posted by harley
I read an article a few months ago about insurance companies not having the assets to cover the annuities if the market went south. From what I remember there is fine print in the contracts saying that you would only get a certain minimum, and therefore the "guarantees" aren't really guaranteed. I'll see if I can find it again.
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Some insurers have LARGE promises to keep (AIG and John Hancock) while others have much less (ING). 40% of John Hancock's revenue comes from VAs with living benefit guarantees........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
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09-15-2008, 09:25 AM
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#9
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 1,543
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Quote:
Originally Posted by harley
I read an article a few months ago about insurance companies not having the assets to cover the annuities if the market went south. From what I remember there is fine print in the contracts saying that you would only get a certain minimum, and therefore the "guarantees" aren't really guaranteed. I'll see if I can find it again.
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years ago i was bought a whole life policy as a gift and it promised all kinds of nice payouts in the marketing literature. i read the small print and it said that nothing is written in stone
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09-15-2008, 09:49 AM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Quote:
Originally Posted by Maurice
I've heard that most states limit recovery of annuities to 100k of present value.
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There are a few states that guarantee higher. DC covers $300K, Washington State $500K. I'm sure it would be a PITA to go through the claim process.
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09-15-2008, 09:54 AM
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#11
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Gosh..... in all the zillions of posts I've read here concerning annuities, I've never really considered questioning the so-called "guarantee." AIG's current situation and the comments in this thread regarding insurance limits, etc., are an eye opener.
I'd considered putting some of my RE portfolio in an annuity since DW is not comfortable with financial matters but never got around to it. It's looking even less likely now......
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09-15-2008, 09:58 AM
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#12
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Where are all those annuity salesmen who once flocked to this board whenever the word "annuity" showed up in their Google alert? You'd think at least one or two of them would pay us a visit to reassure folks their "investment" was safe.
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Numbers is hard
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09-15-2008, 10:01 AM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Quote:
Originally Posted by REWahoo
Where are all those annuity salesmen who once flocked to this board whenever the word "annuity" showed up in their Google alert? You'd think at least one or two of them would pay us a visit to reassure folks their "investment" was safe.
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They will be along shortly.......
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
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09-15-2008, 10:16 AM
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#14
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Moderator Emeritus
Join Date: Feb 2006
Location: San Francisco
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Careful what you wish for - they'll be here bragging that their products paid a straight 4.6% interest rate the whole time the market was losing 20% annualized, housing was depreciating, and recession roared on.
(Maybe they won't tell you about the 4% when the market was doing 10%.)
Based on pure naivete, I suspect that if AIG or another big annuity writer was on the brink of default, you'd see a huge rescue effort by the insurance titans. They can't afford to let that happen - it would kill their new annuity sales in a heartbeat.
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Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.
As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
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09-15-2008, 10:19 AM
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#15
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
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09-15-2008, 10:20 AM
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#16
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Thinks s/he gets paid by the post
Join Date: Aug 2004
Location: Houston
Posts: 1,448
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Yes, where is Art G when you need him?
Oh wait, I put him on ignore. Never mind.
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09-15-2008, 10:22 AM
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#17
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
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Quote:
Originally Posted by Rich_in_Tampa
Careful what you wish for ...
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I thought maybe you mods would appreciate a little change of pace from hosing down the Soapbox forum.
BTW, have any of you guys contacted Mike Rowe to see if he would be interested in doing a episode on you?
__________________
Numbers is hard
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09-15-2008, 10:25 AM
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#18
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Moderator Emeritus
Join Date: Feb 2006
Location: San Francisco
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Who knows.
To me, knowing that thousands of SPIA owners lost 25% of their entire net worth would give me a ton of hesitation about buying such a product from anyone.
If they rescue, people might feel reassured that even in the worst of times, no one lost a nickel in SPIAs.
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.
As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
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09-15-2008, 10:29 AM
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#19
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Thinks s/he gets paid by the post
Join Date: Mar 2006
Location: Houston
Posts: 4,337
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I doubt they're in good enough shape to pick anyone's bones.
I do believe a highly publicized, highly visible failure would destroy the appeal of annuities for a few years.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
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09-15-2008, 10:33 AM
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#20
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Thinks s/he gets paid by the post
Join Date: Jun 2006
Location: Central, Ohio, USA
Posts: 2,635
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I head someplace this morning the Mr Warren B. is in "important" talks with AIG - maybe he is looking for a better deal than BAC got of MER?
Opps: Just saw this at MSN Money: "NY Gov. Paterson says state will effectively lend AIG $20 billion and urges Fed to step up as well. More soon." Wonder what the interest rate is?
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