I know the company very well (past insider status). I would not do business with them.
Alrighty, I'll leave it at that then...
I know the company very well (past insider status). I would not do business with them.
I’m seeing some misinformation, or at least incomplete information, regarding the details of this particular annuity. There is a rider, called the Lifetime Income Benefit Rider that alters the American Equity contract significantly. The link above does not contain the details of this rider where the 8% compounded growth on the income account is guaranteed. You guys are correct about the very low minimum guarantee on the Base Contract Value. But you need to read the fine print on the rider, not just on the base contract, before concluding that it’s a bad deal.
I’m not saying that I’m thrilled with the financial stability of American Equity, they just happen to be the ones offering the best deal. There are several highly rated, well established companies offering similar products, with slightly lower growth and payout percentages, that I am considering. As far as whether or not FIA’s in general are “too good to be true”, I was hoping to get some knowledgeable feedback and real life experience from people who have used this product. I’ll keep looking.
Well that rider is pretty confusing. I hope you noticed the * in their case study where their growth rate is a hypothetical one. My interpretation is that riders don't actually increase the amount of money available in your contract, only the amount of money you can withdraw each year.
When the money you have withdrawn from your policy via you lifetime income benefits exceeds the contract value of your policy your LIB stops even if you and/or your wife are still living. The term lifetime is deliberately deceptive in my opinion.
The only way to get a true lifetime benefit is to annuitize your policy when you turn 70.5. It seems in the worse case you are looking at the 1% minimum growth rate of the policy. So in 11 years you are looking at $111,600 (perhaps less fees and expenses not sure about that). At that time you can withdraw your $15K a year like you want the catch is after 7 or 8 years the money runs out and you have $0. Even if you assume that policy value increases at more reasonable rate of say 5% you'll still run of money in a dozen or so year at 15K/year
As dgoldenz has pointed out EIA/FIA haven't been around very long mid 2000 before they starting taking off. Even the study that you linked to discusses accumulated contract values, not the important information which what are what actually monthly payments. Right now the vast majority of these policies are in the accumulation stage. I suspect the real howls we will here will be in 5 or 10 year. This iswhen people think they can withdraw 15K a year for the rest of their life and find out they can actually only take out 6-8K.
I think you are misunderstanding how the lifetime income rider works. Even when the cash accumulation account is drawn down to $0, the company will continue paying the lifetime income benefit for life at the same amount that it was before the accumulation account value was $0.
Think of the policy as two buckets - one with the accumulated value and one with the income account value. The income account is guaranteed the 8% increase, the accumulation account increases are determined by the crediting method (usually tied to the S&P 500, subject to a cap). The accumulated value is what you can walk away with after the surrender period. The income value is how the lifetime payment is determined as it is based on a percentage of that value. When you start taking annual distributions from the lifetime income rider, the accumulation account is reduced annually by the amount distributed via the income rider.
When the accumulation account is reduced to $0, distributions continue at the same rate as before, but when you (or you + spouse if joint annuity) die, there is nothing left. If you die while there is still an accumulation value available, the accumulated value passes to the beneficiary. That is how an income rider is different from annuitization. You could also choose to annuitize instead if interest rates were to increase in the future and that presented a better option at the time.
It's easier to explain on paper, hopefully that makes sense.
No that makes sense, and that is consistent with the example. I was confused when it said that payments stop when IAV becomes zero due to excess withdrawals. They do say the LIB don't count as excess withdrawals but....
I still remain skeptical that there isn't a catch in the 8% income rider especially given the short time of these products.
The main thing I get form this thread is that for the right man or woman, selling insurance might be a pretty good gig.
Always best to sell something that only 1/100 of customers can understand, where the documents are written in absolute "terms of art", and where alternate sources of the product may be even worse than you are.
And generally, the buyer is going to be in trouble, but likely he won't figure it out until you are way down the road.
Ha
The main thing I get form this thread is that for the right man or woman, selling insurance might be a pretty good gig.
...
Ha