 |
|
05-13-2008, 07:47 AM
|
#41
|
Moderator
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
|
While I don't usually think annuities are a terribly good deal (and the wrong kind of high-fee annuity is terrible), I can see annuities purchased from a low-cost provider like Vanguard to be attractive for at least two groups of people:
(1) High-income individuals for whom eating the fees is worth the tax deferral;
(2) High net-worth individuals who, in some states, are looking to increase asset protection from creditors and lawsuits. Here in Texas, for example, annuities are almost completely untouchable by creditors or to pay legal judgments against you. I can see this being attractive to high-risk occupations like doctors in states like Texas and Florida, where there are strong asset protection laws and many options for building wealth exempted from bankruptcy or lawsuits.
Having said that, an annuity is only as strong as one individual insurer, and that's one of the reasons why even low-cost annuities scare me a bit.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
|
|
|
 |
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!
|
05-13-2008, 08:08 AM
|
#42
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2008
Posts: 6,283
|
Quote:
Originally Posted by rs0460a
Just so happens my SPIA is with Fidelity. After 28 years (my SPIA guaranteed payout), I'll get slightly better than 2x my original investment. The contract is 1 year old, so the interest calcuations would have been around this date, last year.
BTW, I/DW were age 59 at the time of the first payment.
- Ron
|
So you could look at it as 100% return in 28 years. That averages out to about 3.57% return.
What is your excluding rate like, somewhere between 45-50%? So only about half your payments are taxable?
|
|
|
05-13-2008, 08:10 AM
|
#43
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2008
Posts: 6,283
|
Quote:
Originally Posted by ziggy29
(2) High net-worth individuals who, in some states, are looking to increase asset protection from creditors and lawsuits. Here in Texas, for example, annuities are almost completely untouchable by creditors or to pay legal judgments against you. I can see this being attractive to high-risk occupations like doctors in states like Texas and Florida, where there are strong asset protection laws and many options for building wealth exempted from bankruptcy or lawsuits.
|
Didn't OJ have annuities which shielded his income from the judgement against him in the civil case by his in-laws?
Plus yeah, there are nuisance suits as well. I've known people who've gotten burned in the mold litigation of properties they've sold, with the new buyers alleging all kinds of coverups and so forth.
|
|
|
05-13-2008, 08:12 AM
|
#44
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2008
Posts: 6,283
|
Quote:
Originally Posted by brewer12345
Assuming we are not talking about a "participating" policy/annuity, insurers generally do not have discretion to reduce or stop making payments unless that is what is specified in the policy (read the fine print).
Insurance companies cannot file for bankruptcy. Instead, if they get into serious trouble, the regulator steps in and takes control. They ideally try to sell the company to another insurer. If they cannot do that, they liquidate the company and distribute the proceeds to policyholders first, with other creditors only getting paid after the policyholders are made whole. Usually long before a company gets seized and liquidated the regulators are on the scene beating management with a stock and pushing them to try to fix the problem.
|
OK, it's good to know it's spelled out. So annuity holders would also be in front of other creditors as well?
|
|
|
05-13-2008, 08:14 AM
|
#45
|
Moderator
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
|
Quote:
Originally Posted by explanade
Didn't OJ have annuities which shielded his income from the judgement against him in the civil case by his in-laws?
Plus yeah, there are nuisance suits as well. I've known people who've gotten burned in the mold litigation of properties they've sold, with the new buyers alleging all kinds of coverups and so forth.
|
I don't know the details of O.J.'s finances or the specifics of California asset protection law, but yes, much of his wealth was shielded from judgment. The Goldmans can't touch it. O.J. clearly did his homework here.
I know that Ken Lay purchased millions of dollars in annuities a year or two before Enron blew up. These assets are almost certainly protected from lawsuits under Texas law, unless "fraudulent conversion" of assets from non-exempt to exempt can be determined.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
|
|
|
05-13-2008, 08:22 AM
|
#46
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
|
Quote:
Originally Posted by explanade
OK, it's good to know it's spelled out. So annuity holders would also be in front of other creditors as well?
|
Annuity holders would be in line ahead of general creditors, but equal with other policholders. The wrinkle with a SPIA is that I don't know how they calculate what you are owed, whether they just continue a stream of payments or give you a lump sum and wish you good luck.
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
|
|
|
05-13-2008, 08:32 AM
|
#47
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2006
Location: Washington, DC
Posts: 10,759
|
Quote:
Originally Posted by ziggy29
I don't know the details of O.J.'s finances or the specifics of California asset protection law, but yes, much of his wealth was shielded from judgment. The Goldmans can't touch it. O.J. clearly did his homework here.
I know that Ken Lay purchased millions of dollars in annuities a year or two before Enron blew up. These assets are almost certainly protected from lawsuits under Texas law, unless "fraudulent conversion" of assets from non-exempt to exempt can be determined.
|
So, if we get really POd at someone and are considering some nasty deed, we should get an annuity and then wait a year to off him -- or whatever. Makes sense - revenge is a dish best served cold. Of course, getting the annuity might be used to demonstrate premeditation - darn
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
|
|
|
05-13-2008, 08:35 AM
|
#48
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,702
|
Quote:
Originally Posted by ziggy29
I know that Ken Lay purchased millions of dollars in annuities
|
Yeah, and look how THAT turned out for him.
Scandal, bankruptcy, criminal conviction, and sudden death.
Dont let this happen to YOU!
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
|
|
|
05-13-2008, 08:52 AM
|
#49
|
Thinks s/he gets paid by the post
Join Date: Jan 2008
Posts: 2,020
|
Quote:
Originally Posted by cute fuzzy bunny
Yeah, and look how THAT turned out for him.
Scandal, bankruptcy, criminal conviction, and sudden death.
Dont let this happen to YOU! 
|
Come to think of it, if that was the case, then the carrier probably offed him. Huge influx in premium with absolutely no payout!
|
|
|
05-13-2008, 09:00 AM
|
#50
|
Thinks s/he gets paid by the post
Join Date: Jan 2008
Posts: 2,020
|
Just a thought on gaming the system... sort of.
I used to work at a large electronics retailer (rhymes with Jest Guy). Our discount was 5% over cost. Typically you have to wait 60 days before the discount kicks in but during the Christmas rush, everyone got the discount right away).
I now work at a large insurance company (and I'm told we're the #1 seller of FIAs but we sell SPIAs, FAs, VAs, life and LTC). One of our perks here is that, if you buy a product through the internal sales team, you get the commission paid into your policy. And, of course, there are certain promotional events throughout the year where agents and/or customers get bigger incentives to buy. So, if you bought whichever product happened to be featured, you could stand to get a bonus 15% into your
contract.
I'm sure many other companies offer similar perks when you work for them.
So, my point is, go get a temp job when you're ready to buy an annuity and go work for a day during Christmas when you're ready to buy that new LCD TV.
Oh, and I've decided that there's no issue with solvency at my employer because we have a time capsule buried beneath the entrance that says 'open in 2051'.
|
|
|
05-13-2008, 09:14 AM
|
#51
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
|
Quote:
Originally Posted by Marquette
Come to think of it, if that was the case, then the carrier probably offed him. Huge influx in premium with absolutely no payout!
|
I'm sure his wife was the beneficiary, or a trust.........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
|
|
|
05-13-2008, 09:18 AM
|
#52
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
|
Quote:
Originally Posted by ziggy29
(2) High net-worth individuals who, in some states, are looking to increase asset protection from creditors and lawsuits. Here in Texas, for example, annuities are almost completely untouchable by creditors or to pay legal judgments against you. I can see this being attractive to high-risk occupations like doctors in states like Texas and Florida, where there are strong asset protection laws and many options for building wealth exempted from bankruptcy or lawsuits.
Having said that, an annuity is only as strong as one individual insurer, and that's one of the reasons why even low-cost annuities scare me a bit.
|
One advisor I knew did that in Florida with a number of neuro and cardio surgeons..........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
|
|
|
05-13-2008, 09:21 AM
|
#53
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 48,848
|
Quote:
Originally Posted by Marquette
Oh, and I've decided that there's no issue with solvency at my employer because we have a time capsule buried beneath the entrance that says 'open in 2051'.
|
What are the odds it contains the remains of Jimmy Hoffa?
__________________
Numbers is hard
The key to understanding human behavior is realizing half the population is below average.
|
|
|
05-13-2008, 09:22 AM
|
#54
|
Thinks s/he gets paid by the post
Join Date: Jan 2008
Posts: 2,020
|
Quote:
Originally Posted by REWahoo
What are the odds it contains the remains of Jimmy Hoffa?
|
Probably pretty low... we built this office in 2001. Then again, if he bought a large enough annuity from us and didn't name any beneficiaries...
|
|
|
05-13-2008, 10:38 AM
|
#55
|
Full time employment: Posting here.
Join Date: Feb 2006
Posts: 987
|
Quote:
Originally Posted by explanade
So you could look at it as 100% return in 28 years. That averages out to about 3.57% return.
What is your excluding rate like, somewhere between 45-50%? So only about half your payments are taxable?
|
Actually, I/DW still have more than 90% of our retirement portfolio available (60/40) beyond the SPIA.
Like I said before, an SPIA is not for all people, but for a limited few (no estate to pass on, ER'd before 60, and other sources of income in retirement) it may make sense.
I really don't worry about other folks. All I know is in our case, it works. Our goal is to have enough money to continue to live in the manner in which we have become accustomed. An SPIA (as part of our "total program") makes sense.
You may not like it - so what? As the old saying says "what you think of me is none of my business  ...."
- Ron
|
|
|
05-13-2008, 11:05 AM
|
#56
|
Moderator
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
|
Quote:
Originally Posted by FinanceDude
One advisor I knew did that in Florida with a number of neuro and cardio surgeons..........
|
I can believe it. This is exactly the type of individual for whom these things truly make sense -- high-income, high net worth, at high risk of lawsuit, and residing in states where these things are fully protected as exempt assets. For these people, the tax deferral and asset protection features likely justify the fees and expenses of a low cost annuity.
But they are a small minority of the overall population. People with low net worth who haven't even maxed out contributions to other tax-deferred, judgment-proof investments are often sold these things and for them it almost certainly makes no sense.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
|
|
|
05-13-2008, 11:18 AM
|
#57
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2006
Location: Washington, DC
Posts: 10,759
|
Speaking of judgment proof -- to what extent, if any, are IRAs and 401Ks exempt from civil suits?
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
|
|
|
05-13-2008, 11:21 AM
|
#58
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
|
Quote:
Originally Posted by donheff
Speaking of judgment proof -- to what extent, if any, are IRAs and 401Ks exempt from civil suits?
|
It depends on the state, I want to say it is $1,000,000 on 401K's..........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
|
|
|
05-13-2008, 11:33 AM
|
#59
|
Thinks s/he gets paid by the post
Join Date: Jan 2008
Posts: 2,020
|
Quote:
Originally Posted by donheff
Speaking of judgment proof -- to what extent, if any, are IRAs and 401Ks exempt from civil suits?
|
CCH Financial Planning Toolkit | ERISA and Retirement Asset Protection
afaik, ianal, etc, etc, etc...
Old stuff I thought I knew:
An ERISA plan is exempt from judgment. This includes a 401(k), I think an IRA funded by rollover (but not an IRA otherwise), and I would assume a 403(b). It does not cover SEPs, stock bonuses, IRAs, etc.
State law could cover non-ERISA plans.
New stuff that may be different from that?:
FPA Journal - Creditor Protection for Retirement Accounts: ERISA, the Supreme Court, and the Bankruptcy Act of 2005
|
|
|
05-13-2008, 11:45 AM
|
#60
|
Moderator
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
|
Quote:
Originally Posted by FinanceDude
It depends on the state, I want to say it is $1,000,000 on 401K's..........
|
I believe it's the other way around at the federal level: unlimited for 401Ks and up to $1 million for traditional/Roth IRAs.
Some states differ from the federal default. In particular, a few states provide an unlimited exemption for these retirement accounts from civil suits and bankruptcy. And of those, a small number -- Florida, Texas and Oklahoma -- also provide for a virtually unlimited exemption for a homesteaded personal residence.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
|
|
|
 |
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Thread Tools |
Search this Thread |
|
|
Display Modes |
Linear Mode
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|