Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 11-29-2020, 08:19 AM   #21
Thinks s/he gets paid by the post
 
Join Date: Jun 2003
Location: Historic Florida
Posts: 4,766
Thanks, I read through the whole document. Great writing, and I agree with your comments of suitability on the last 2 products.
__________________
"Never Argue With a Fool, Onlookers May Not Be Able To Tell the Difference." - Mark Twain
ShokWaveRider is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 11-29-2020, 08:42 AM   #22
Recycles dryer sheets
 
Join Date: May 2019
Posts: 165
Well Done!
JRon is offline   Reply With Quote
Old 11-29-2020, 09:06 AM   #23
Recycles dryer sheets
Go-NoGo's Avatar
 
Join Date: Oct 2016
Posts: 319
Quote:
Originally Posted by audreyh1 View Post
Maybe the moderators can create a sticky thread with links to all your papers. Very valuable resource.
+1

These are great resources for those not familiar with the terms and pros/cons of these financial instruments.

Nice work!
Go-NoGo is offline   Reply With Quote
Old 11-29-2020, 09:11 AM   #24
Moderator
sengsational's Avatar
 
Join Date: Oct 2010
Posts: 8,098
Quote:
Originally Posted by audreyh1 View Post
Maybe the moderators can create a sticky thread with links to all your papers. Very valuable resource.
Several other of Rick's papers are in the FAQ forum, so I added this one as well.


https://www.early-retirement.org/for...ml#post2518630
sengsational is offline   Reply With Quote
Old 11-29-2020, 09:19 AM   #25
Thinks s/he gets paid by the post
38Chevy454's Avatar
 
Join Date: Sep 2013
Location: Cincinnati, OH
Posts: 2,968
Thanks for this guide. I really have no desire to ever buy or hold an annuity, but this is good information to help anyone. It just confirms my choice to stay away from them.
__________________
The advice we're giving you is invaluable, that's why it's free
Experience is a good teacher, but the tuition can get expensive real fast

Semi-Retired 7/1/16: working part-time (60%) for now [4/24/17 changed to 80%]
Retired Aug 2, 2017; age 53
38Chevy454 is offline   Reply With Quote
Variable Annuity Use Case
Old 11-29-2020, 09:31 AM   #26
Moderator
sengsational's Avatar
 
Join Date: Oct 2010
Posts: 8,098
Variable Annuity Use Case

I'm not sure it's mainstream enough to qualify for inclusion, but I know of a possible use for one of the better variable annuities (no commission, low expense wrapper on low expense funds like those sold by Fidelity, and formerly Vanguard).

If you have kids going to college, you can get a discount if your after-tax bank account is not too big; the FAFSA "expected family contribution" is based on the sum of after tax (but not 'retirement') savings. Schools call them 'scholarships', but they're basically discounts off the list price, based on expected family contribution. Through the purchase of a variable annuity, funds become 'retirement assets' and so the discounts become available as the after tax portfolio gets below a certain amount.

Given favorable annuity rules (no surrender fee and no need to ever annuitize) the negative is that it's FIFO (pay tax on all gains to uncover the original contribution), and not getting the favorable tax treatment of qualified dividends and capital gains. Those negatives might not outweigh the benefit of getting a discount on higher education, especially if you're funding multiple kids at high cost schools.
sengsational is offline   Reply With Quote
Old 11-29-2020, 10:17 PM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 5,814
Thanks OP. Very well done and easy to understand. Should have read this sooner but it confirmed my decision to pursue a MYGA today.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is offline   Reply With Quote
Old 11-30-2020, 12:47 AM   #28
Recycles dryer sheets
Dd852's Avatar
 
Join Date: Jul 2013
Location: London/UK
Posts: 420
Really useful. My mother is currently ill at 84 and asked me, finally, to take a look at her finances.... nearly everything in variable annuities! Too late to do anything about it now, but at least I understand better what it is she was sold. Irritating and Iím sure very costly over the years, but she never was one to take advice from family members!
Dd852 is offline   Reply With Quote
Old 11-30-2020, 09:23 AM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 6,507
Quote:
Originally Posted by Dd852 View Post
Really useful. My mother is currently ill at 84 and asked me, finally, to take a look at her finances.... nearly everything in variable annuities! Too late to do anything about it now, but at least I understand better what it is she was sold. Irritating and Iím sure very costly over the years, but she never was one to take advice from family members!
If she was sold unsuitable investments you can get the purchases cancelled. IMO it's worth a call to your state attorney general. Insurance companies are constantly getting sued for this in class actions and losing. Allianz and Prudential come to mind.

When I took over my mom's finances I found a ticket marked "unsolicited" to purchase a Dreyfus muni fund. At that time her income was so low that I didn't even file tax returns. Obviously there was a Dreyfus sales contest going on. I didn't pursue it because it was not big bucks but an unsuitable variable annuity is a bigger deal.
__________________
Ignoramus et ignorabimus
OldShooter is offline   Reply With Quote
Old 11-30-2020, 09:52 AM   #30
Thinks s/he gets paid by the post
38Chevy454's Avatar
 
Join Date: Sep 2013
Location: Cincinnati, OH
Posts: 2,968
Quote:
Originally Posted by Dd852 View Post
Really useful. My mother is currently ill at 84 and asked me, finally, to take a look at her finances.... nearly everything in variable annuities! Too late to do anything about it now, but at least I understand better what it is she was sold. Irritating and I’m sure very costly over the years, but she never was one to take advice from family members!

Quote:
Originally Posted by OldShooter View Post
If she was sold unsuitable investments you can get the purchases cancelled. IMO it's worth a call to your state attorney general. Insurance companies are constantly getting sued for this in class actions and losing. Allianz and Prudential come to mind.

When I took over my mom's finances I found a ticket marked "unsolicited" to purchase a Dreyfus muni fund. At that time her income was so low that I didn't even file tax returns. Obviously there was a Dreyfus sales contest going on. I didn't pursue it because it was not big bucks but an unsuitable variable annuity is a bigger deal.

Is there any statute of limitations type factor? It seems in Dd852's case the annuities have been in place for several years at least. Just curious if something that wasn't recent could still be pulled back and cancelled?
__________________
The advice we're giving you is invaluable, that's why it's free
Experience is a good teacher, but the tuition can get expensive real fast

Semi-Retired 7/1/16: working part-time (60%) for now [4/24/17 changed to 80%]
Retired Aug 2, 2017; age 53
38Chevy454 is offline   Reply With Quote
Old 11-30-2020, 01:47 PM   #31
Recycles dryer sheets
 
Join Date: Jul 2018
Posts: 142
I found out about Annuities once I got the contracts. The problem was my FA who bought them for me, sent me the contracts a couple months after I signed them. When I called to ask about them I was told you only have 30 days to review and cancel them. I was past the limit. Lucky for me only one of them was a index annuity. The other two were MYGA. I have two more years to get out of the Surrender charges on the Jackson.
Bruno is offline   Reply With Quote
Old 11-30-2020, 01:54 PM   #32
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 6,507
Quote:
Originally Posted by 38Chevy454 View Post
Is there any statute of limitations type factor? It seems in Dd852's case the annuities have been in place for several years at least. Just curious if something that wasn't recent could still be pulled back and cancelled?
It have no idea but I also do not try to prejudge things like this. AFIK all state attorneys general are elected, so all will have people specifically charged to help voters citizens who have been wronged. Even if there is nothing to do legally, no insurance company likes coming to the attention of the AG's office so even a nasty AG letter might make something good happen.
__________________
Ignoramus et ignorabimus
OldShooter is offline   Reply With Quote
Old 12-01-2020, 11:22 AM   #33
Recycles dryer sheets
Dd852's Avatar
 
Join Date: Jul 2013
Location: London/UK
Posts: 420
Quote:
Originally Posted by OldShooter View Post
It have no idea but I also do not try to prejudge things like this. AFIK all state attorneys general are elected, so all will have people specifically charged to help voters citizens who have been wronged. Even if there is nothing to do legally, no insurance company likes coming to the attention of the AG's office so even a nasty AG letter might make something good happen.

Thanks. She bought them quite a while ago; she had no mental issues and held a PhD (though not in anything related to finance) - I think it would be impossible to argue she didnít make a conscious choice.
Dd852 is offline   Reply With Quote
Old 12-01-2020, 11:37 AM   #34
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 6,507
Quote:
Originally Posted by Dd852 View Post
Thanks. She bought them quite a while ago; she had no mental issues and held a PhD (though not in anything related to finance) - I think it would be impossible to argue she didnít make a conscious choice.
Admittedly this is a long shot. But the question is not whether she was competent to make the decision. The question is whether she was sold an investment that was unsuitable. The seller is presumed to have more expertise than the buyer and it is legally on him/her to not sell unsuitable investments.

On the security side, a Series 7 registered representative is held to the suitability standard. For example, putting a person with low income heavily into tax-free munis or Argentine bonds would probably be viewed by a court as unsuitable. On the insurance side I know less, but I read often enough about companies like Allianz and Prudential having to cough up because they violated this standard.

It doesn't cost anything to try IMO. All the AG can tell you is "Sorry, Charlie."
__________________
Ignoramus et ignorabimus
OldShooter is offline   Reply With Quote
Old 12-01-2020, 02:22 PM   #35
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 29,138
Quote:
Originally Posted by OldShooter View Post
Admittedly this is a long shot. ...
Sounds more like a wild good chase to me.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...target 65/35/0 AA TBD
pb4uski is offline   Reply With Quote
Old 12-01-2020, 02:59 PM   #36
Thinks s/he gets paid by the post
 
Join Date: Aug 2010
Location: Back woods of Fennario
Posts: 1,095
Quote:
Originally Posted by pb4uski View Post
There is a flavor of SPIA that also deserves mention as it is sort of in between a MYGA and a life-contingent SPIA and that is a period certain SPIA where the benefit payments are fixed for a defined period of time... you pay the insurer a single premium and they pay you $x per month for y years. The IRR usually isn't very attractive but it is available.

It is similar to the MYGA in that the benefit payments are a mix of principal and interest and are not dependent on your still being alive.
pb4uski: Some the money DW has in her TIAA Traditional 403b must be annuitized. One option is a Transfer Payout Annuity and is as you describe above. The portion that must be annuitized goes in and is paid out over ten annual payments. On the TIAA website you can estimate the payout (depending on when you start of course...). If I plug the payment into the TPA and then the 10 payments out using their estimated annual payment into Excel IRR function, I am getting IRR=3.49%.

Is that a poor IRR in your esteem? Am I thinking incorrectly or is my calculation off?
__________________
"Time wounds all heels...." - Groucho Marx
LRDave is offline   Reply With Quote
Old 12-01-2020, 10:20 PM   #37
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 29,138
Not at all... IMO that is a great IRR. So each annual payment is 12.02% of the premium?
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...target 65/35/0 AA TBD
pb4uski is offline   Reply With Quote
Old 12-02-2020, 07:42 AM   #38
Thinks s/he gets paid by the post
 
Join Date: Aug 2010
Location: Back woods of Fennario
Posts: 1,095
Quote:
Originally Posted by pb4uski View Post
Not at all... IMO that is a great IRR. So each annual payment is 12.02% of the premium?
Yes - almost exactly.
__________________
"Time wounds all heels...." - Groucho Marx
LRDave is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Reporter's Guide To Fixed Annuities GarySpicuzza FIRE and Money 42 04-18-2008 09:32 AM
Four Pillars and Bogleheads' Guide Jeb-NY FIRE and Money 3 01-04-2006 03:34 PM
New Years Eve Drunken Sex Guide cute fuzzy bunny Other topics 2 01-03-2006 11:02 AM
Forbes 2006 Investment Guide Brat FIRE and Money 8 12-22-2005 11:06 AM
Dilbert/Scott Adams' guide to personal finance... soupcxan Other topics 2 10-01-2004 06:53 AM

» Quick Links

 
All times are GMT -6. The time now is 09:56 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.