Attack of the Living Annuity Salesmen?

[brewer12345]

Maybe I am just "tetched in the haid," but it seems to me that we are being overrun by greasy pumpers of all flavors of annuities. These guys are all salespeople and it shows: glossing over inconvenient facts, pointing out all the good stuff, trying to take advantage of group approval effects, etc. Why are we being bombarded by these guys lately? It makes the boards a lot less fun to participate in, since tehy are all convinced that these preoducts are the greatest thing since sliced bread and do not take kindly to those who disagree with them. I'm all for spirited debate, but lately the air of salesmen trying to drum up business has put a damper on honest debate in favor of pushing product.

What is to be done about this?

 

[Martha]

I confess that I have been skipping the annuities threads. Brewer, why not you or another financially savvy person put together a FAQ type post on annuities, describe each kind and the issues with each type. I would then be glad to collect threads and add them to the FAQ. Then, we could point people to the FAQ when annuities come up.

Just a thought anyway.

 

[FinanceDude]

I confess that I have been skipping the annuities threads. Brewer, why not you or another financially savvy person put together a FAQ type post on annuities, describe each kind and the issues with each type. I would then be glad to collect threads and add them to the FAQ. Then, we could point people to the FAQ when annuities come up.

Just a thought anyway.

I would help him if he wants it. I think he may need editorial oversight anyway because objectiveness for him is often overcome by passion..........

 

[73ss454]

Let me ask the 1st question of the experts.

Since every book I've read states that no one can stay on top of the mountain forever and predict the market, how do ins companies do it.

If the SWR is 4% and the ins company takes 3 to 4% for fees where does the extra money come from.

To me there's something rotten with the #'s.

 

[brewer12345]

Very simple guide to annuities:

If someone offers you an annuity, get in you car and drive as far away from them as you can. If they jump in front of your car to stop you, keep going. But make sure you back over them a couple times before you continue.

Seriously, I'll think about it. FD, you want to kick out some ideas? I could do the fixed, equity indexed and maybe the SPIA parts. You want to try on the VA part?

 

[FinanceDude]

Very simple guide to annuities:

If someone offers you an annuity, get in you car and drive as far away from them as you can. If they jump in front of your car to stop you, keep going. But make sure you back over them a couple times before you continue.

Seriously, I'll think about it. FD, you want to kick out some ideas? I could do the fixed, equity indexed and maybe the SPIA parts. You want to try on the VA part?

I'd be willing to help. I am knowlegeable on fixed and VA, somewhat on SPIA, and not really on EIA because I don't like them.......

PM me and we can talk. Maybe if we did have a FAQ section, we could eliminate a lot of the strange chatter and keep the life agents with 3 posts at bay........

 

[FinanceDude]

Let me ask the 1st question of the experts.

Since every book I've read states that no one can stay on top of the mountain forever and predict the market, how do ins companies do it.

If the SWR is 4% and the ins company takes 3 to 4% for fees where does the extra money come from.

To me there's something rotten with the #'s.

It comes from exotic things like commercial REITs, lease buyback programs on jets with major carriers, wine vineyards, commodities..........all supposedly getting more than the guaranteed amount they pay you. Of course, subprime mortgages were a part of their investment strategy, but that didn't work out so well...........

It reminds me of the hour-long conversation I had with one of my clients whose pissed at the banks because she had 5% CDs for 3 years, and the renewals are 4 % or less........

 

[brewer12345]

Maybe if we did have a FAQ section, we could eliminate a lot of the strange chatter and keep the life agents with 3 posts at bay........

Not even with three rabid pitulls, an electric fence with razor wire, and a couple of drunk hillbillies with shotguns.

But I agree on the value of a FAQ.

 

[honobob]

Since every book I've read states that no one can stay on top of the mountain forever and predict the market, how do ins companies do it.

Real Estate.

 

[brewer12345]

Real Estate.

Ummm, no. There is very, very little real estate on most life insurance company balance sheets, aside from their own facilities. Some don't even own those.

 

[73ss454]

FD, so your telling me that the people from Ins. companies are smarter than the people who run mutual funds, ETF's and other financials.

I just don't buy it because if this is the case than ESRBOB and all the other authors who write these books have to be wrong.

I think if it looks like a duck, walks like a duck, it's a duck.

 

[brewer12345]

FD, so your telling me that the people from Ins. companies are smarter than the people who run mutual funds, ETF's and other financials.

Some are. Some are a lot dumber. Oh, the stories I could tell you...

 

[CCdaCE]

... and how many of these annuity goons actually get any business from acting like idiots on da intarweb forums? Very confusing to me.

I guess if you buy a VA, you're probably not a internet-forum-reader type. ...so, back to my original question. I still haven't answered my own question.

-CC

 

[yakers]

While you are doing that could you have something specifically about teachers annuities and 403bs? I mentally understand that a SPIA could work for some in some circumstances. But I actually feel annuities are evil from my experience with my wife's 403b annuity and the way they work in most school systems. Maybe a link to 403(b)wise: The 403(b) Information Center would help. A very few districts have decent systems but its absolutely amazing the thieves that 'provide' the annuities in Los Angeles, Chicago and many, many systems. My wife had a personal return rate of 9.2% which sounds kind of good, or at least OK, but the fund she held wad a proxy for the Fidelity Contrafund which returned 14%+ during the period she held her fund. Most teachers would be better off skipping the tax deferred offerings and just doing a Roth because of the annuity costs.

 

[RonBoyd]

And since my Retirement Plan relies quite heavily on winning the Powerball Lottery (and soon, I hope), could you add a section on whether to take the lump sum cash or the annuity?

 

[brewer12345]

And since my Retirement Plan relies quite heavily on winning the Powerball Lottery (and soon, I hope), could you add a section on whether to take the lump sum cash or the annuity?

Depends on how out-of-control your crack habit is.

 

[FinanceDude]

While you are doing that could you have something specifically about teachers annuities and 403bs? I mentally understand that a SPIA could work for some in some circumstances. But I actually feel annuities are evil from my experience with my wife's 403b annuity and the way they work in most school systems. Maybe a link to 403(b)wise: The 403(b) Information Center would help. A very few districts have decent systems but its absolutely amazing the thieves that 'provide' the annuities in Los Angeles, Chicago and many, many systems. My wife had a personal return rate of 9.2% which sounds kind of good, or at least OK, but the fund she held wad a proxy for the Fidelity Contrafund which returned 14%+ during the period she held her fund. Most teachers would be better off skipping the tax deferred offerings and just doing a Roth because of the annuity costs.

Brought to you by the nice folks at Horace Mann, Principal Financial,John Hancock,etc...........

 

[rs0460a]

Here's some info on SPIA's (for whomever is writing about it):

Money Magazine, Retirement Guide. Income plan - Sep. 12, 2006

And of course Bob's work, referenced here:

Immediate Annuities in Retirement

Am I an expert (on SPIA's)? Nope. All I have to offer is that I have one, and it works in my (and my wife's) situation.

I'll repeat myself (again) but it seems like "youse guys" are looking for input on at least one type of annuity, so here it goes:

Age: me - 60, wife - 60

Retired: me - yes, wife ("still pondering") - planned for May of '07, but still not "emotionally ready" (even if financially so).

Concerned about retirement income? Not really. Currently have a 60/40 mix in our joint retirement portfolio.

Sources of income (current/future). Six sources:
- SS (she - 62, me - 70) - inflation indexed.
- VA disability (me - current) - inflation indexed.
- Defined Benefit "e.g. pension" (she - 65 - two separate, but small ones from former jobs) - not inflation indexed.

In a nutshell, we have/will have six sources of income coming "on-line" over the next 10 years. The largest, my SS is the last to start.

We all agree that a $1 today is worth more than a $1 tomorrow, a non-inflation indexed annuity (e.g. SPIA) is a poor vehicle for long-term income security, but it does have a place (as in our income plan) early-on in retirement. That's why the argument of loss of value over the long term means less to us. Remember, an SPIA is to ensure income when you are living, not when you are dead (as an insurance vehicle). Over the "long term", we still have our 90% remaining portfolio to hopefully beat inflation and build in the future.

How much did we invest? 10% of our joint retirement account value a/o June of '07. Due to the "fall" in the market, that "poor annuity" is doing better than the 90% (at the time) of the remainder of our investments.

BTW, you cannot put more than 50% of your retirement assets into an SPIA. That is part of the standard application process. The few folks that said "you can loose it all if you invest your entire portfolio value" are incorrect (but they are "passionate")

Another argument against any annuity is the statement "if you die, you lose your money". Yes you can, but there are ways around this "problem". My contract (after much review, and proposals from more than one company) has a guaranteed payout period. The total payments are equal to 2x what I paid. If I die before age 87, the payments continue to my wife till she turns 86.9. If we both pass before the 28 year period ends, the remainder payments (or lump sum - also stated in the contract) goes to our beneficiary.

As far as our estate, this happens to be a major sticking point in most folk's consideration of any annuity. That is, the idea that you can't "pass on" anything. In our case, that dosen't come into play, since our estate is going to charity.

Will we buy more (SPIA's) in the future? There is a good chance, as we age. I don't necessarily want to turn the reigns over to somebody else (no family to do it) and pay for it. You can see this same type of logic being used by Taylor on the Diehards Board. As he ages (currently in his 80's) he/wife are doing this.

As for my wife/me, our goal is to have enough income to live the life we currently do (which is good, thank you) without concerns for income for the rest of our lives. As I always say (to anybody that will listen) "I rather die with money, than live without it".....

Anyway, that's my "thoughts" on the subject to you Admins!

Have a good day...

- Ron

 

[Nords]

Maybe I am just "tetched in the haid," but it seems to me that we are being overrun by greasy pumpers of all flavors of annuities.
Why are we being bombarded by these guys lately?

Like Willie Sutton says, "That's where the money is". Or at least that's what they think. These guys don't drum up much business on Dave Ramsey's website or SimpleLiving.net or FatWallet.com or Oprah's get-out-of-debt shows.

I've read that the discussion boards run for the benefit of ultra-high-net-worth individuals (tens of millions of $$ or higher) are by personal invitation only and frequently include verification of both identity and assets. So unless Ace G. himself was flogging the annuities it'd be kinda hard for them to get past the moderators.

What is to be done about this?

Hmmm... are you asking about finding a less-greasy variety of annuity pumper? Don't think I can help with that. Sounds awful messy.

The moderators seem to figure it out pretty quickly (especially when aided by a couple hundred reported posts from the other members). These guys rarely achieve banning criteria, and if they were banned just for flogging annuities then the mods would have to listen to even more complaints about jack-booted suppression of freedom of expression. Heck, they already get far too many complaints about not making people welcome here.

So it seems better to take the time-honored approach of feeding out the rope as fast as they can wrap it around their necks, and then seeing what happens to the slack when they make a bungee-jumping leap of faith. And after a while the sales guys decide there's other fertile fields to be plowed... like over at Greaney's board with that nice young man Rob Bennett...

And for everything else there's the "Ignore Poster" list.

 

[ERD50]

The markets down. So it's a good time for:

" And I can't remember things bein' so bad.

Then there comes a man with a paper and a pen
Tellin' us our hard times are about to end.* "

It's much harder to play on people's fears in a bull market.

-ERD50

* The Band - 'King Harvest'

YouTube - The Band - King Harvest 1970 - Long Black Veil 1970

 

[chinaco]

Forget what they are trying to sell for a minute. How many insurance agents have you ever talked with and found them to appear sharp.

My expereince has been very very few. Most have little financial knowledge. Every once in a while I meet one that is pretty smart.

Most I have met are not the sharpest knife in the drawer. Not a surprise. It is difficult to sell the stuff.

Annuities are often misrepresented. For that matter so is life insurance.

 

[chinaco]

When interest rates are down (and thuse CD rates)... banks push annuities (arrangement with Insurance co) as an alternative to CDs.

Right now, there is a huge amount of money flowing into annuities.

Since a deferred fixed annuity is based on longer term investments (and are guaranteed)... the rate is higher than short-term investments.

People get sucked in. It happens when rates are low as sure as the sun shines.

 

[brewer12345]

Forget what they are trying to sell for a minute. How many insurance agents have you ever talked with and found them to appear sharp.

The garden variety ones, I would agree. The ones that deal with the HNW crowd, I would say otherwise. But their expertise tends to be very specialized (estate planning, etc.).

 

[donheff]

Maybe I am just "tetched in the haid," but it seems to me that we are being overrun by greasy pumpers of all flavors of annuities. These guys are all salespeople and it shows: glossing over inconvenient facts, pointing out all the good stuff, trying to take advantage of group approval effects, etc.

I was outa town having fun so I'm a little late but I agree that we are getting some "greasy" pitches. The last guy (that disappeared) was like a drive by shooting - but what the heck did he expect to get from it all. I have a low level continuing interest in SPIAs or DIY versions of the same as a "spending floor assurance vehicle." But I don't like the attitude of these sales critters.

 

[ERD50]

The last guy (that disappeared) was like a drive by shooting - but what the heck did he expect to get from it all.

I get the impression these guys don't invest much time checking out the forum. They see 'retired' and 'forum' and they are thinking 'happy hunting grounds'.

It would be interesting to see what responses they got on some more generic forums. Probably quite a few hits...

-ERD50