What tax advantages? Paying the HIGHER ordinary income tax rate? I don't consider that any "advantage".
If, as some posters have stated, you can buy this inside your IRA, then it is taxed the same as any other $ you withdraw from your IRA, capital gains, dividends, or otherwise. Therefore, while it's not an "advantage" tax-wise, it surely isn't a disadvantage.
A separate account of bond/stock index funds is taxed at the normal capital gains tax rate.
Ummmm...nope! Show me a bond that is taxed at "normal" capital gains tax rates.
I would also take any bond any day that is taxed at "normal" capital gains tax rates.
Anything investing that involves an insurance contract is NOT going to have any kind of cost advantage. That's for sure!
Anything that involves an insurance contract (when examined by educated readers of this forum) is NOT going to have any kind of investing advantage. That's for sure!
Don't combine investing and insurance, and don't confuse the two. Insurance is for insurance. Investing is for investing. A SPIA or this deferred annuity product are essentially "insurance" for guaranteeing at least some income stream to live off of. I don't see people talking these products up as a way to reach the top 1%-2% of net worth individuals. Rather, people talk about them as a way to INSURE against not having at least some steady income stream to live off of.
These insurance products can be expected to return about 3% if you live long. I'm not talking about interest rate return. I'm talking about return on investment. As far as interest payment rate, these insurance products are fools gold, like the video explains. Eventually that fixed payment rate will stink!
Oh, so you're talking about interest rate payments? I suppose you would more strongly suggest people instead simply pluck it all down on 30 year Treasury bonds, paying.....wait for it......3%?
Oh, so we shouldn't buy 30 year treasuries, and instead just by 5 year Treasuries and wait for the interest rates to rise? Of course, the 1.5% for 5 year is just as good as the 3% 30 year. And it would have been great if someone just stuck to that plan in 2009/2010, as they waited for the inevitable interest rate reversion in...oh, yeah, rates are still non-existent.
You said "annuities might be appropriate for some retirees who worry about running out of money". Again, name for me a period in the past in which a conservative portfolio of bond and stock index funds would have run out of money. This didn't even happen if you started in 1969, the worst time in history to retire! You REALLY sound like an insurance salesman.
Do you read what you are quoting? The other poster said "annuities
might be appropriate for some retirees who
worry about running out of money." Name for me a 30 year period in which a portfolio DIDN'T suffer a large swing in value or volatility. You have to live off of your portfolio for 30-40-50 years. You must live every day with the volatility. Some people can handle more than others. Just as some people don't want to live below a certain threshold of standard of living, some people don't want to live below a certain "worry" of income.
Can you explain what they are supposed to do as they are worrying themselves to death as the market gyrates 20%-30% or more? you don't know what the market will do, but you do know that there is a way to help insure you have at least some income that you can depend on (based on the claims-paying ability of the regulated insurer).
I can show you how many homes have been damaged by earthquakes in St. Louis from the New Madrid fault over the past 50 years. ZERO. Obviously, it was a waste to buy earthquake insurance. And, if an earthquake did happen, it likely wouldn't level everything. But, if someone
is worried about earthquake damage, it
might be appropriate to buy insurance to give them peace of mind and unload that risk onto someone else. Just as with any other insurance product, be it long-term care, or umbrella insurance, or a host of other items or risks to insure against.
Yes, there is a trade-off and a cost for that peace of mind. But
some people (including me) would see value in SOME level of protection/peace of mind.