Annuities - Opinions Yay or Nay?

[Tracer]

A SPIA is the only type of annuity I would ever buy. The others are complicated, have the highest fees (mostly hidden) and pay the sales person who sells it to you the highest commissions. That reason alone made me skeptical. I bought my SPIA's (I spread them between two companies) when I retired. Interest rates were better then so I'm getting a decent return. The payments are mostly tax free because they were purchased with after tax money. Only the portion they consider gains are included on my return.

I'll have my entire investment back in another five years. The insurance companies will continue making my monthly payments for the rest of my life. I am debt free so the payments plus SS more than cover my basic living expenses. It's comforting to know those payments will always be there no matter what the market does. I'm just now starting to withdraw from my IRA RMD's only because I am required to.

 

[imoldernu]

I apologize in advance, If I have posted this in another thread.

It's a warning. Do not buy an annuity from MetLife/Brighthouse.

Long and shot:
$8400 annuit boght 1984. Value today $65,000+
Asked for a 5 year monthly payout of $1200 / month on Feb 3.
Upwards of 40 phone calls with promises hangups, confusion, ignorance and every negative you can think of. Finally received acknowledgement on May 15.

MetLife had an impossible marriage with Brighthouse. Neither accepts responsibility for claims... even to the office of the CEO's of both companies. "We don't handle that!. Both hung up on me.

Here's why.... Years ago, metlife stiffed 30,000 people who invested with insurance or annuities. They made no contact when a policy holder died or moved. after a period of time, they took the money and paid the executives and stockholders.

After a court case, the company was required to hold aside $500 million dollars, but with no requirement that the company contact the debtors or their families. Too complicated to explain, but avoid this company at all cost.

https://www.investmentnews.com/arti...-sued-for-500-million-over-missing-pensioners

 

[brewer12345]

If you run into a runaround like this with an insurer, tell them that you need the nonsense to stop immediately or you will be filing a complaint with the state insurance commissioner. This will usually get their full intention. If not, contact the commissioner and file a complaint.

 

[pb4uski]

+1 but I had already recommended to imoldernu that he contact his insurance commissioner a couple weeks ago. He's a bit like a broken record.

Also, at the mid-sized life insurer that I worked at any written complaints addressed to the President or CEO got special andling by more senior and experienced personnel (in some cases, me) who had broader relationships in the company to bypass roadblocks and who had the authority to do things that went beyond the script.... but I don't know whether other insurers have similar practices or not.

I posted a warning on annuities on a recent thread.. This may be a good time to renew a caution on the subject.
We have an annuity from Brighthouse/Metlife that has caused a serious problem, in that they have stalled and refused to pay out our legitimate claim (monthly income stream). After about 20 hone calls and numerous letters, there has been no action at all for four months, and we are hopefully awaiting action from the Attorney Generals of Illinois and South Carolina that we have contacted.

In looking for comments that might mirror mine, I came across this legal judgement (link below) against the company for fraud.

For older persons who had forgotten about annuities from long ago, or had passed away, the company did no research on where the monies should have gone... but... closed the accounts and kept the monies that were due. Between 13,000 and 30,000 customers were affected. A slap on the wrist for the company with a $1,000,000 fine, and a transfer of $500,000,000 to an account for future claims.

https://www.bna.com/metlife-brighthouse-sued-n73014476623/

Despite this, the company retains an "A" rating.

Based on our experience, I would never again trust this company, and would only go in to this kind of supposed future security with great caution. Caveat Emptor.

You should be talking with the Insurance Commissioner for your state rather than the AG. The Insurance Commissioner is better positioned to press the for an answer and resolution. IME Commissioners do a pretty good job acting as an intermediary between the company and its citizens. The Commissioner would have the power to threaten to kill their authority to sell in Illinois if they didn't like the answer that the company was providing.

Having worked with MetLife (but albeit before the Brighthouse spinoff), I am surprised that they would be resisting a valid claim, so I suspect that there may be a bit more to this story. Have they stated why they won't start annuity payments?

The company has taken a hit for not chasing down annuitants dilligently and from what has been reported in the press and their own disclosures have released reserves prematurely... the money is still there (assuming that it hasn't been distributed as dividends to the holding company)... it is just in surplus rather than in reserves.

 

[TN_INVEST]

You're right. I can't call participation rates, caps, surrender fees, spread/margin/asset fees fees, right? That would be misinformed.

Those things exist with index and fixed annuities, but they are not fees anymore than saying a local bank has fees on their 12 month CD.

 

[pb4uski]

^^^^ Not for fixed annuities.... usually just surrender fees and an interest rate.

No need for a participation rate or cap with a fixed annuity since there is no index to participate in or cap. The spread is built into the interest rate.

The thing is that fixed annuities tend to be simple, an interest rate and surrender charge (analogous to an early withdrawal penalty on a bank CD... but usually much larger)... less moving parts so easier to understand.

 

[TN_INVEST]

What makes an SPIA acceptable to many, while other annuities are not? Is it the simplicity and competition that makes it hard to hide expenses and keeps the prices low? Or something else? I see this tossed around all the time with no explanation why.

I feel it is because a SPIA has no alternative. Sure, you can setup an investment portfolio and draw income from it, but it will not be fixed and insured for the remainder of your and your beneficiary's life (even a 30 year bond stops paying in 30 years).

There are alternatives available to accumulation annuities, and many folks on this board have the wherewithall to handle their own money just fine.

This is not an endorsement for a SPIA. I still don't like the thought of turning over my principal and think you can find some high yielding ETFs, stocks and bonds to generate income and still retain access to principal.

 

[CRLLS]

^^^^ Not for fixed annuities.... usually just surrender fees and an interest rate.

No need for a participation rate or cap with a fixed annuity since there is no index to participate in or cap. The spread is built into the interest rate.

The thing is that fixed annuities tend to be simple, an interest rate and surrender charge (analogous to an early withdrawal penalty on a bank CD... but usually much larger)... less moving parts so easier to understand.

I'd like to know more about that surrender charge you mention. I've never bought an SPIA. From what I read, the only way to get out of a "fixed" SPIA is to sell it on the secondary market. Essentially there is no surrender clause in a fixed SPIA, which I believe that most here are referring to. You are saying that is not true. Where do I go to learn more about this online without getting info tailored by the insurance company or getting a sales pitch?

 

[pb4uski]

I'd like to know more about that surrender charge you mention. I've never bought an SPIA. From what I read, the only way to get out of a "fixed" SPIA is to sell it on the secondary market. Essentially there is no surrender clause in a fixed SPIA, which I believe that most here are referring to. You are saying that is not true. Where do I go to learn more about this online without getting info tailored by the insurance company or getting a sales pitch?

Sorry, I wasn't clear... surrender charge only on fixed deferred annuities...you can't surrender a SPIA.. but you can sell it.

 

[capjak]

I'd like to know more about that surrender charge you mention. I've never bought an SPIA. From what I read, the only way to get out of a "fixed" SPIA is to sell it on the secondary market. Essentially there is no surrender clause in a fixed SPIA, which I believe that most here are referring to. You are saying that is not true. Where do I go to learn more about this online without getting info tailored by the insurance company or getting a sales pitch?

SPIA do not have surrender charges, you surrender sort of 100% up front.

I think the poster is referring to Multi Year Guaranteed Annuity(MYGA) which is basically the insurance equivalent of a CD. For example, You purchase 5 year MYGA at say 3% Fixed interest paid compounded each year for that 5 years. If you surrender early there is a fee similar but usually higher than surrender early of a CD. At the end of 5 years you either cash it in (and pay the tax on interest earned) or roll it into another MYGA etc....

 

[imoldernu]

"+1 but I had already recommended to imoldernu that he contact his insurance commissioner a couple weeks ago. He's a bit like a broken record."

I filed written complaints to four of the states where MetLife/Brighthouse have offices, outlining the three and a half months where there was no response. It took three weeks to get the first reply from one state, which was similar to the other state that replied.

In short, there were two pages of suggestions and recommendations on how to obtain legal representation, filing small claims (which does not apply to tens of thousands of dollar claims), and a suggestion that I should look to see if the company had a binding arbitration clause in their contract. Not even a mention of whether they had forwarded the complaint to the company.

I'm writing here to warn about the company (Metlife) that has been sued for not paying 30,000 work provided annuities. The case was settled by the requirement that the company hold in reserve five hundred million dollars to repair the damages that had been done to those victims.. who now are mostly dead and forgotten.

The lawsuit was Roycroft vs. Metlife.
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I have been sticking to this issue, not for sympathy, but to make clear that everything that we think we're covered for... by law... doesn't always work.
(Get a Lawyer) ... the most common answer when things like this happen. Maybe not as easy as it sounds. 15% of the $65,000 in question would mean a fee of nearly $10,000.... with only a chance that the court decision would cover the lawyer fee.
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Life isn't always easy. Just today, in Chicago local TV news, a case came up where 400 workers who had healthcare plans paid for by the employer were left with no way to pay for care, and have become destitute. The husband and wife who owned the company, are millionaires... and claimed bankruptcy for the company. BTW... it appears that they own a $10,000,000 home. Pictures in the news this AM. "Fund me" plans to help the workers who are selling their homes and cars just to pay bills. Court proceedings in the works, but as always, 6 months to a year for settlement.
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greetings... from the broken record...

 

[CRLLS]

Sorry, I wasn't clear... surrender charge only on fixed deferred annuities...you can't surrender a SPIA.. but you can sell it.

OK. Thanks. That corresponds with what I read. I assume that selling a fixed SPIA outright would be a big loss even if one had it for 10-20 years. I think that is what most are referring to here when the mention SPAI (Single Payment Immediate Annuity) It may be that imoldernu had a "deferred annuity" of some sort that he was getting the runaround on.

I've mentioned before that I annuitized a LI policy with MetLife. It was a several month long ordeal to get it resolved per my LI contract. MetLife and BrightHouse were both involved. In fact I know that MetLife paid Brighthouse for my LI annuitization (not an "annuity"). I'm pretty sure that BrightHouse does the actual monthly paperwork on behalf of MetLife. The checks come in with a MetLife written across the top not Brighthouse. The divestiture between ML and BH somehow isn't as separate as one might believe.

 

[imoldernu]

I know that the thread is on annuities, but with so many comments on pensions, thought this as a Distant Early Warning that unless congress enacts a safety net, the Pension Benefit Guarantee Corporation is on a path to problems by 2025.

The highlighted point of concern is only 130 multi employer plans that are destined to be insolvent by 2025, but the article goes into some depth to indicate that the unknown future of the PBGC is a major concern.

So not directly affecting all annuity based pensions, but based on what I've seen, in my own case... not all annuities are safe. BTW... the Metlife policy that I had problems with has been transferred to another company. That makes 7 changes in one single policy (different companies), since our policy was bought from Travellers.

I've been called to task several times for crying wolf about annuities.
Perhaps so... but maybe for persons who are on the fence about the future money plans, should be aware of a situation in flux.

Here, FWIW :
https://www.huffpost.com/entry/a-million-people-could-lose-their-pensions-without-help-from-congress_n_5ce5be5fe4b0547bd131edbd

 

[imoldernu]

.

I've mentioned before that I annuitized a LI policy with MetLife. It was a several month long ordeal to get it resolved per my LI contract. MetLife and BrightHouse were both involved. In fact I know that MetLife paid Brighthouse for my LI annuitization (not an "annuity"). I'm pretty sure that BrightHouse does the actual monthly paperwork on behalf of MetLife. The checks come in with a MetLife written across the top not Brighthouse. The divestiture between ML and BH somehow isn't as separate as one might believe.

An update on this mess: I just received a letter telling us that Metlife is now

Brighthouse Insurance Co.
Brighthouse Insurance Company of New York
New England Employers Life Insurance Company of New England.
all three .

I think maybe a sign of things to come.

While not directly related to this discussion, I think of the Chicago Teacher Pension Plan problems. If I were in a position to decide how to receive a , defined-benefit pension plan, I'd spend some time looking hard at the alternatives, and at least look at the Huffington article.

 

[MarieIG]

My husband does not have the option of a lump sum payment. Allegedly, it is well funded.

Also, if the spouse does not get the survivor option, the spouse cannot get the health insurance.