Need Some Quick advice: Midland Retire X-Cel Option (6% for Life)

[rhurhurun]

Sub: Need Some Quick advice: Midland Retire X-Cel Option (6% for Life): Linked with midland fixed income annuities

Dear All,
I am new to this forum. I am 43 years old (Not that young to post here though) and planning for my retirement. I am looking to build a conservative nest egg of the best possible guaranteed income starting from the age of 63. I have been advised about the product given the subject with the following calculations
Example:-
• Invest Start 100,000 USD receive 10,000USD (10%) bonus
• Invest 2000 every month from there on for about 20 years in total. Earn the 10% bonus on the incremental value every year for 7 years from the starting year.
• Following a retirement table aim to to hit the annual lifetime payment amount (LPA) of 56,000 USD per annum. This is the arrived at using the following table
o Age 63 (20 years from now)
o GMWB (Guaranteed Minimum Withdrawal Benefit) Value – 1.25 Million USD
o This is arrived at including a bonus credit percentage of 6%
o This provides me a LPP (Lifetime payment percentage) of 4.5% per year which in value is about 56,000 USD per year
o I do understand that the values go up if I try to push my withdrawal to later years but at this point I am keeping this as my target to compare different options/products.
o I also understand that The GMWB Value is used only in determining your future income benefits under the Rider. This value is the total value on which my income payments are based and is not available for withdrawal.
o I am assuming though that I will get to see that actual Accumulation Value under my base annuity Contract which I should be choosing. ( I have some questions on this too)
• Now let me list down some of my questions
o Any advice/inputs on Midland as company, fund and how they manage it.. Are there any specific risks with Midland?
o Any comparisons or products that I should be looking at. (I read a lot about some Vanguard products, but anything specific matching to this will be of help)
o Are there better / strong products which provide better than 6% bonus credit for every year that I delay taking this income, better than 10% investment bonus for 7 years and/or better LPP percentages.
o Now coming to the accumulation value and annuity contract which needs to be chosen. (Linked with Retire X-cel) Here is where I am a bit confused. Currently I am recommended MNL retirevantage, annual point to point method (APP index CAP rate only) linked to S&P 500 with Retire X-cel provides a percentage of 4.15%. As I see other products within Midland called “Midland Innovator choice series which takes annual Point to Point to 7.5% Cap (linked with S&P 500) 10 year option and 6% odd for a 14 year option) and then there are “Midland Prosperity choice series” which shows even higher numbers. APP (Annual Point to Point) percentage at 25% linked to S&P 500.
Thanks and would appreciate any inputs around this.
regards

 

[brewer12345]

Run as fast as you can and do not look back. Lock the doors and run all the red lights.

 

[73ss454]

Welcome Rhurhurun, pay carefull attention to what Brewer had to say. You need to do some reading before you start thinking of retirement. Don't do a thing till you hang around here for a while.

 

[Nords]

Run as fast as you can and do not look back. Lock the doors and run all the red lights.

Which part triggered the alarm? The word "Midland", the acronym "GMWB", or all the densely worded "fine print" phrases?

 

[james7]

If you invest the amount they are asking for ($100,000 initally and $2,000 a month for 20 years), how much money will you be able to walk (or run) away with in a lump sum at that time, 20 years from now? No monthly payments, just a lump sum. Thanks, and don't run just yet, think about it and the many other options available.

 

[toofrugalformycat]

The very idea that you need this "quick" means it is almost certainly a very bad idea.
Any time someone tries to quickly push you into any type of investment, you should be extremely skeptical and in fact, that just about rules out whatever they are pushing, IMHO.

 

[Coolius]

I feel that the part of your post where you should be especially careful thinking through is from the word "example" until the word "regards".

In full disclosure, I have never liked annuities. Enough said.

 

[devans0]

The very first questions I would ask is how long this company has been in this business and will Midland Retire Ex Cell be around in twenty years and if they are, what are the chances that they have invested in good enough assets to pay their salaries and your benefits? As I read it, they are promising the returns that they make after their expenses, but not a set amount. Is their record better than say the blue chip dividend payers going back 60-80 years or more?

Compare this with Vanguard, or Fidelity, or T Rowe Price, or GE, Coka Cola.

Now you have an idea of why people said run and what to run to.

 

[obgyn65]

Hello - you may find this article helpful Do-It-Yourself Annuities: A Blueprint - SmartMoney.com

 

[brewer12345]

Which part triggered the alarm? The word "Midland", the acronym "GMWB", or all the densely worded "fine print" phrases?

None. The stupefying complexity of the product as proposed to someone who comes across as a not-sophisticated investor.

 

[rhurhurun]

Thanks all for your inputs and advise. Appreciate the candid comments too. I will continue to read this forum and do more research before I make any decisions. I do have a need now to move my existing annuity account with Pacific Life annuity so I am looking for options. I will look into some of the suggestions like Vanguard, Fidelity as well and keep posting in this forum for inputs. thanks.

 

[Tractor guy]

From what I've read, annuities of any form are almost a great idea for the salesman and a poor idea for the investor. They are generally designed to confuse and bewilder the person buying them to the point where they don't realize how much money they are giving the insurance company in up front and on-going fees. They're pushed by some financial advisors because they make a lot of money with them.

Saying this, there are a few cases where they make sense. I suggest you read a very good series of articles by Mel Lindauer on them before you put any more money in any form of annuity. You can find the first one here:

Annuities: Good, Bad Or Ugly? - Forbes.com

 

[pb4uski]

Sounds like some sort of equity indexed annuity with a GMWB. These are very complicated products and as others have stated, generally better for the agent and the issuer than the policyholder.

If I invested in an annuity (I don't own one), Northwestern Mutual or New York Life would be my first choice, but I would prefer Pacific Life over Midland. Why do you have to move from Pacific Life?

 

[Rowdy]

Fees, Fees, and more Fees.

 

[Rich]

rhurhurun:

The other posters have basically said it all. Have you read and comprehended the entire prospectus? Do you realize that the reason the document is there is not to inform you, but to confuse and obfuscate the product so that it is incomprehensible to even a knowledgeable reader. Even if you read the full prospectus you'll never figure out all the fees you'll be charged. The product was not designed for your benefit, but rather for the benefit of the company and their sales staff.

One last thing. A good salesman will be able to refute every argument against this product you throw at him. He will make representations that are outright falsehoods and which he will later deny. You are a fish, he is the fisherman.

You've been warned. Best of luck.

Rich

 

[Nords]

John Greaney and Wade Pfau have been digging into GLWBs:

Comparison of Fidelity and Vanguard Gauranteed Life Withdrawal Benefit (GLWB)

Pensions, Retirement Planning, and Economics Blog: On the Pros and Cons of GLWBs

But the problem with GLWBs is that it is so hard to determine the real world meaning of the price. The benefit of the GLWB is also rather abstract as well.
In that regard, I do think the analysis provided in Joseph Tomlinson’s new column can be very helpful in quantifying the real world impact of the GLWB fees, and so help retirees to decide whether the guarantees are “worth it” for them.
Again, I am not condemning GLWBs. I suppose I am just saying that I would like to see greater transparency about the meaning of the fees so that people can make better decisions about them.
If you are thinking about purchasing a GLWB, make sure to do your homework and understand all of the features and fees.

If you need these guys to help determine whether GLWBs are a good deal then... well... good luck with that.