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Old 08-02-2009, 06:27 PM   #41
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When I typed the table in the previous post, it was find in the box I typed in but when submitted, it squashed all the number together. Very hard to read but hopefully you can make it out. The bottome line is that after
10 years, the S&P 500 Index was at 912.32 down from 1372.71. The index annuity on the other hand, had increased by 35%.

The reason is that during the down years, the annuity lost nothing. The most it made in any year though was 7%. Warren Buffet said once, " if you want to get rich in the stock market, don't lose money in down years." Easier said than done. But very, very true. That is what I like about the fixed, indexed annuity. It guarantees you never lose anything in down years. And unlike VA's, there are no fees unless you add an income rider on it. (We can talk about that feature later on)

HERE IS THE THING. It is great to earn 0 when everybody else is losing their shirt. When the market turns, you get good returns but on less than 100% of your money if you have suffered losses. Now for those who are smart enough to buy low and sell high and can always time it right and follow through to avoid the losses, then BY ALL MEANS stay in the market and manage your money yourself. But those guys are few and far between if you ask me.

Now the key on the index annuity, is this: you have to be able to make good money in the up years. You will never make as much as the market makes but you can make much better than the 7% I used in the chart over the last 10 years. How? You have to have an index strategy that allow you to do that. Not every index strategy offers the variety of index strategies that you need to maximize your growth rate, imo

But let me finish up by giving you a real-life example in my next post of a person who has the right index annuity using the right strategy and I will show you how powerful it is. I will also point out what you need to look for in the right index annuity.
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Old 08-02-2009, 07:11 PM   #42
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When I typed the table in the previous post, it was find in the box I typed in but when submitted, it squashed all the number together. Very hard to read but hopefully you can make it out. The bottome line is that after
10 years, the S&P 500 Index was at 912.32 down from 1372.71. The index annuity on the other hand, had increased by 35%.

The reason is that during the down years, the annuity lost nothing. The most it made in any year though was 7%. Warren Buffet said once, " if you want to get rich in the stock market, don't lose money in down years." Easier said than done. But very, very true. That is what I like about the fixed, indexed annuity. It guarantees you never lose anything in down years. And unlike VA's, there are no fees unless you add an income rider on it. (We can talk about that feature later on)

HERE IS THE THING. It is great to earn 0 when everybody else is losing their shirt. When the market turns, you get good returns but on less than 100% of your money if you have suffered losses. Now for those who are smart enough to buy low and sell high and can always time it right and follow through to avoid the losses, then BY ALL MEANS stay in the market and manage your money yourself. But those guys are few and far between if you ask me.

Now the key on the index annuity, is this: you have to be able to make good money in the up years. You will never make as much as the market makes but you can make much better than the 7% I used in the chart over the last 10 years. How? You have to have an index strategy that allow you to do that. Not every index strategy offers the variety of index strategies that you need to maximize your growth rate, imo

But let me finish up by giving you a real-life example in my next post of a person who has the right index annuity using the right strategy and I will show you how powerful it is. I will also point out what you need to look for in the right index annuity.
Ah what a shill. Just like the product itself: all sizzle, no steak.
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Old 08-02-2009, 07:12 PM   #43
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An EIA (equity index annuity) is NOT a security. It is an insurance product and is
better called a fixed, indexed annuity. Like all fixed annuities, it earns an interest rate
every year. In case of index annuities, the interest rate is determined by the performance of an index, usually an equity index.

The interest rate is determined by how the Index does for a particular 12 month period. However, unlike a Variable Annuity where you can lose money if the market declines, the worst you can do with a fixed, indexed annuity is earn zero for that year. Your balance remains the same as it was at the end of the previous year.

I went to Yahoo Finance and pulled up the last ten years for the S&P 500 Index showing monthly quotes and used June figures. The table below gives you the actual quotes of each year for June. It also shows the index change from year to year and how the index changes affect the interest rate on the annuity. I used a stragegy for the index annuity of annual point to point with a 7% cap for simplicity sake. There are other strategies that we will discuss later in another post.

It is important to understand what a fixed index annuity is and what it is desgined to do before I get into the details of what I am looking for in the best indexed annuity .
I will look at the details of my favorite plan in the next post. Meanwhile, be sure and
take a good look at the table below and understand it.
DATE S&P 500 INDEX EIA INTEREST ANNUITY BALANCE
CHANGE RATE
June 1999 1372.71 $100,000.00
June 2000 1454.60 5.97% 5.97% $105,965.57
June 2001 1224.38 -15.83% 0% $105,965.57
June 2002 989.82 -19.16% 0% $105,965.57
June 2003 974.50 -1.55% 0% $105,965.57
June 2004 1140.84 17.07% 7.00% $113,383.16
June 2005 1191.33 4.43% 4.43% $118,401.14
June 2006 1270.20 6.62% 6.62% $126,239.69
June 2007 1503.62 18.38% 7.0% $135,076.47
June 2008 1280.00 -14.87% 0% $135,076.47
June 2009 912.32 -28.73% 0% $135,076.47
Okay, I can follow this. You've already answered Rich_in_Tampa's question - these numbers do not include dividends.

It looks like you've got more to add.
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Old 08-02-2009, 08:00 PM   #44
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Please explain the liquidity features of this EIA and how it interacts with
the gains in the example you gave, i.e. can you have both the full downside
protection and limited gains shown here as well as being liquid.
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Old 08-02-2009, 08:30 PM   #45
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When I typed the table in the previous post, it was find in the box I typed in but when submitted, it squashed all the number together.
Tip:

Copy/paste the table into a word processor, set the font to "Courier", and then get everything lined up with spaces if needed.

Then paste that into your post, select the table and then click the "#" symbol in the list of icons above the post. It will put "[-CODE-] tags around the table, and preserve the plain mono-spaced font. Should be easy to read then.

Oh, and as mentioned, include the divs from The S&P. This can be done by using the "adjusted" column in yahoo finance. S&P still lost value during that time frame, so don't worry, your product will still look better. But at least we won't be able to call you out on this simple factual error (that happens to be in your favor ).


I'm guessing this comparison was not part of your sales pitch in 1999?


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Old 08-02-2009, 08:51 PM   #46
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Please explain the liquidity features of this EIA and how it interacts with
the gains in the example you gave, i.e. can you have both the full downside
protection and limited gains shown here as well as being liquid.
In all of the EIAs I have ever seen, you can get liuquidity any time you like, but there is generally a 10% (+/-) surrender penalty in the first 7 to 10 years.
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Old 08-02-2009, 09:20 PM   #47
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But you get the advertised protections and gains?
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Old 08-02-2009, 10:15 PM   #48
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Independent, that is a great idea. I will be happy to give you the details of my favorite EIA so you can understand how it works and what it has done. Your approach is refreshing. Too many people make opinionated statements with nothing to back it up and many take them as facts.
The post Brewer made is a good example.
Overall as an author of 11 total posts you would do better to lay off the shooting gallery stuff.

If we want to, we are completely capable of taking care of ourselves.

Ha
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Old 08-03-2009, 07:39 PM   #49
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So can we add another notch to the gunbelt on this one, or is our EIA-shill-of-the-month still at it?
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Old 08-03-2009, 07:42 PM   #50
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Move along, move along, nothing to see here, move along...
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Old 08-03-2009, 07:57 PM   #51
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So can we add another notch to the gunbelt on this one, or is our EIA-shill-of-the-month still at it?
I think we should add a topic to the Early Retirement FAQs - "Threads with wild promises of fame and fortune that turned out to be made by self-promoting salespeople who underestimated the combined experience and knowledge of this forum".


BTW, excellent thread by you that REWhoo referenced:

How to replicate an equity-indexed annuity (EIA)

I understand the concepts, but this was a great breakdown of the mechanics. I saved it to my hard drive this time (just for reference and understanding - I wouldn't do it either ). Nice work.


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Old 08-03-2009, 09:58 PM   #52
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Hey - did a post disappear? The "real life example"?

Audrey
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Old 08-03-2009, 10:23 PM   #53
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Hey - did a post disappear?
Our policy is to not comment on specific moderator actions. However, I will point out we have a "take no prisoners" policy when it comes to spam, including the immediate deletion of posts and termination of forum membership.
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Old 08-03-2009, 11:39 PM   #54
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Hey - did a post disappear? The "real life example"?
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Our policy is to not comment on specific moderator actions.
If you really want to know all the grisly details of the story's brutally merciless conclusion, then you have to volunteer to be a moderator!
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Old 08-04-2009, 05:59 AM   #55
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Well, maybe our salescritter will try again without the spam...
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Old 08-04-2009, 06:02 AM   #56
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But you get the advertised protections and gains?
Generally yes, with two caveats. One is the aforementioned surrender penalty. The second is the nasty tax treatment that annuities get when you cash them in, especially if you are under 59.5 YO.

All this assumes the carrier doesn't go bust.
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Old 08-04-2009, 09:05 AM   #57
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Generally yes, with two caveats. One is the aforementioned surrender penalty. The second is the nasty tax treatment that annuities get when you cash them in, especially if you are under 59.5 YO.

All this assumes the carrier doesn't go bust.
Thanks, brewer. Reason I asked was I thought at least some of these things get preferred treatment......but only if you annuitize. Maybe I'm mixing up
the floor and participation guarantees w/ an additional annual return guarantee.
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Old 08-04-2009, 09:08 AM   #58
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Our policy is to not comment on specific moderator actions. However, I will point out we have a "take no prisoners" policy when it comes to spam, including the immediate deletion of posts and termination of forum membership.
I feel somewhat responsible for this because I was the one who encouraged him to back up his general statements about the value of EIA's with real numbers. I figure EIAs are an appealing concept, but that they usually fall down when you look at the hard numbers. (In fact, the reference to perpetual motion is pretty relevant.)

Maybe you can say something in general about about "spam".

Is describing and pointing out the pros a specific product (and not giving equal time to the cons) unacceptable "spam"? Or, does it become spam when you are simply cutting and pasting sales material? Or, only when you're dumping sales material into an unrelated thread?
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Old 08-04-2009, 09:45 AM   #59
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I feel somewhat responsible for this because I was the one who encouraged him to back up his general statements about the value of EIA's with real numbers. I figure EIAs are an appealing concept, but that they usually fall down when you look at the hard numbers. (In fact, the reference to perpetual motion is pretty relevant.)
Independent......I'm w/ you. It would have been interesting to have seen the claims and then a point by point critique. I think it would have been educational.
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Old 08-04-2009, 09:49 AM   #60
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I feel somewhat responsible for this because I was the one who encouraged him to back up his general statements about the value of EIA's with real numbers. I figure EIAs are an appealing concept, but that they usually fall down when you look at the hard numbers. (In fact, the reference to perpetual motion is pretty relevant.)

Maybe you can say something in general about about "spam".

Is describing and pointing out the pros a specific product (and not giving equal time to the cons) unacceptable "spam"? Or, does it become spam when you are simply cutting and pasting sales material? Or, only when you're dumping sales material into an unrelated thread?
I'm not a moderator so I'm bound by no requirements to not discuss anything. The annuity salesman posted his email address and asked for individuals to contact him about annuities. That is most likely the issue with him posting here. I think our community rules say something like "no soliciting". Especially by annuity salesmen.
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