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Old 10-15-2017, 05:37 PM   #61
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Originally Posted by aln1117 View Post
So just to be clear on a FIA . What is and how is income rider set?
Trust me, don't bother going down this rabbit hole. There are a bunch of different flavors, but they all boil down to the same thing: you put in a lump sum, the insurance company gives your money back to you over time, the product runs out of money, and you end up with nothing.
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Old 10-15-2017, 05:41 PM   #62
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I agree with you that many people don't understand the nuances. I think the insurance industry lacks education for the agents and the consumers...

..but explain to me how an unsophisticated, uneducated insurance agent is getting some of the very few people who were actually smart enough to save to the point they can retire to commit 10's and 100's of thousand dollars to the products they offer. are these pre-retirees and new retirees that dumb. Not to mention , everyone and their mothers are telling these people and they're still buying the product.

Before '08 VA's were the hot product they had high income rider. Everyone was happy , Agents and advisors were getting paid, FINRA were gettting their membership dues but then the crash happened. INsurance companies realize their guaranteed riders were way too high so much so some were offering to buy back the annuities. Many people Started buying FIA's instead because the riders had much better guarantees. FINRA wasn't happy because agents don't need a securities license to sell FIA because they are a fixed product. This is where it all started. The fiduciary rule has nothing to do with anyone really looking out for the consumer. You should own your finances.. learn the product, learn the benefits , learn the downsides. Every financial product is a tool .. There's a case to be made for each tool. There is always a tradeoff... whether it's stocks, bonds, annuities, insurance, Real estate etc.. Lifetime annuities are here for guaranteed income stream. that's it. Yes there are MYGa's and FIA (w/ no rider) that can be used as a CD alternative but most FIA's gets sold with income rider.

FYI .. I don't sell annuities.
Actually, it is the muppets customers who are unsophisticated, often getting rooked with their meager life savings. The agents understand pretty well what they are selling (especially the commission schedule.

Since you brought it up, what exactly do you sell?
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Old 10-15-2017, 06:02 PM   #63
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Actually, it is the muppets customers who are unsophisticated, often getting rooked with their meager life savings. The agents understand pretty well what they are selling (especially the commission schedule.

Since you brought it up, what exactly do you sell?
You brought up what I sell .. but I sell life insurance. more specifically .. impaired risk life insurance.


I don't care how dumb you are .. you just don't give away 10's and 100k like that... especially when the "dumb ones' are probably the one who didn't save for retirement. As a saver, you're the exception , not the rule
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Old 10-15-2017, 06:07 PM   #64
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OK, but try not to change it more than once, at least not in the direction of big swings. Just map out what happens if you go from 80/20 to 60/40 after a downswing, then back to 80/20 after an upswing, and back down to 60/40 after a downswing. Classic "buy high, sell low" recipe.


Absolutely.
I rode it out till it recovered the loss + a bit more, than moved to 70/30.
Next drop and I was less worried but still not sleeping well. Rode it out and moved to 60/40. Next drop I slept like a baby.
These were pretty small percentage drops, still wondering how happy I'll be at 60/40 when we get a 30% correction.
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Old 10-15-2017, 06:37 PM   #65
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You brought up what I sell .. but I sell life insurance. more specifically .. impaired risk life insurance.


I don't care how dumb you are .. you just don't give away 10's and 100k like that... especially when the "dumb ones' are probably the one who didn't save for retirement. As a saver, you're the exception , not the rule
Been a while since I saw the study, but IIRC the average annuity buyer had something like 75 to 150k in savings. Draw what conclusions you like.
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Old 10-15-2017, 06:41 PM   #66
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So just to be clear on a FIA . What is and how is income rider set?
you give a lump sum to the insurance company today.. many will have a rider that guarantees a certain amount depending on when you take it out .. so if you start withdrawing year 5 .. for the rest of your life time. The income you get will be less if you start withdrawing year 7. The insurance company guarantees you that they will pay it for the rest of your lifetime. The way they come up with that number varies from product to product but this is what I call the "noise".. at the end of the day .. What is the benefit for YOU? coompare it to alternatives ..and see if it makes sense for YOU.

Therefore It is important to make sure you pick a company that has strong financials. These companies have third party ratings but you should dive deeper in the financials and see if the company makes money every year and if they have a healthy "surplus"
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Old 10-15-2017, 07:27 PM   #67
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Been a while since I saw the study, but IIRC the average annuity buyer had something like 75 to 150k in savings. Draw what conclusions you like.
This does not tell much ...
1- What type of annuities are we talking.. the statement is not specific to income annuities (SPIA, DIA, or FIA w/ income riders) .. these are different than MYGA's or FIA's with no riders. I know a lot of medicare agents for example sell MYGA's to their clients who would most likely be in that 75-150k.. how much? I don't know...
2. what is the average annuity case from those same folks.
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Old 10-15-2017, 08:45 PM   #68
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This does not tell much ...
1- What type of annuities are we talking.. the statement is not specific to income annuities (SPIA, DIA, or FIA w/ income riders) .. these are different than MYGA's or FIA's with no riders. I know a lot of medicare agents for example sell MYGA's to their clients who would most likely be in that 75-150k.. how much? I don't know...
2. what is the average annuity case from those same folks.
Average annuity was the bulk of their savings, IIRC. This was for all forms of general account annuity, stuff other than VAs. We are not talking about sophisticated buyers. That is why they are dumb enough to buy this crap.
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Old 10-15-2017, 08:49 PM   #69
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..but explain to me how an unsophisticated, uneducated insurance agent is getting some of the very few people who were actually smart enough to save to the point they can retire to commit 10's and 100's of thousand dollars to the products they offer.
Neither high intelligence nor sophistication are traits that accomplished savers need to have. Rather, they need some discipline, willingness to delay gratification, and the willingness to envision and prepare financially for their needs decades in the future. These same traits can, unfortunately, make these savers juicy marks for annuity salesmen. As you probably know, a primary tactic is sell the "prudence" and safety of these products ("an income you can't outlive" blah, blah, blah. Inflation? Fuggeddaboudit--that won't happen again).
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Old 10-15-2017, 09:33 PM   #70
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Average annuity was the bulk of their savings, IIRC. This was for all forms of general account annuity, stuff other than VAs. We are not talking about sophisticated buyers. That is why they are dumb enough to buy this crap.
avg annuity was the bulk of their savings.. sounds like a MYGA customer to be not a customer buying FIA w/ income rider. which is the bulk of FIAs out there'

it's not a savings play.. a MYGA is .. it's more of an income play.
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Old 10-15-2017, 09:47 PM   #71
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Neither high intelligence nor sophistication are traits that accomplished savers need to have. Rather, they need some discipline, willingness to delay gratification, and the willingness to envision and prepare financially for their needs decades in the future. These same traits can, unfortunately, make these savers juicy marks for annuity salesmen. As you probably know, a primary tactic is sell the "prudence" and safety of these products ("an income you can't outlive" blah, blah, blah. Inflation? Fuggeddaboudit--that won't happen again).
This brings be back to what I say about financial tools.. People love to have arguments about what is good and what is bad... It's not an either or scenario. What annuities does best is provide you with guaranteed income.. stocks gave you the higher potential return.. Bank savings account gives you liquidity and security.

You can use all these tools to better serve you if you know what they do best and where they're not the best fit.

Here's an example .. Susie is 57 .. She has done well in her retirement account The market has been great to her since '08 and she knows she's on track to retire at 67.. but she doesn't want a massive correction to alter her plans...
Susie knows come retirment time, she will have a set of expenses that she will need to plan for.. Susie would like to secure a guaranteed income stream for her expenses knowing that no matter what happens with the market, at least her expenses are covered.
She has made sure that her emergency fund is well funded. Then She decides to take out an income annuity to cover those expenses. She realizes that to maximize her potential return she can put her funds in the market knowing that if there is a correction ... she's covered. She can also be more aggressive since she has a guaranteed income stream coming in. If the market goes up, 28% one year , she doesn't feel hamstrung that she has to take 4% ... She can be a little more daring. The return she gets from the market would also be a hedge against inflation.

(she could also go with an annuity with an inflation rider but the initial guarantee would be smaller. There is always a tradeoff)

3 different financial tools working together in harmony.
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Old 10-15-2017, 09:53 PM   #72
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This brings be back to what I say about financial tools.. People love to have arguments about what is good and what is bad... It's not an either or scenario. What annuities does best is provide you with guaranteed income.. stocks gave you the higher potential return.. Bank savings account gives you liquidity and security.

You can use all these tools to better serve you if you know what they do best and where they're not the best fit.

Here's an example .. Susie is 57 .. She has done well in her retirement account The market has been great to her since '08 and she knows she's on track to retire at 67.. but she doesn't want a massive correction to alter her plans...
Susie knows come retirment time, she will have a set of expenses that she will need to plan for.. Susie would like to secure a guaranteed income stream for her expenses knowing that no matter what happens with the market, at least her expenses are covered.
She has made sure that her emergency fund is well funded. Then She decides to take out an income annuity to cover those expenses. She realizes that to maximize her potential return she can put her funds in the market knowing that if there is a correction ... she's covered. She can also be more aggressive since she has a guaranteed income stream coming in. If the market goes up, 28% one year , she doesn't feel hamstrung that she has to take 4% ... She can be a little more daring. The return she gets from the market would also be a hedge against inflation.

(she could also go with an annuity with an inflation rider but the initial guarantee would be smaller. There is always a tradeoff)

3 different financial tools working together in harmony.
As long as it enriches an insurance agent it is all good, eh?
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Old 10-15-2017, 10:02 PM   #73
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You can use all these tools to better serve you if you know what they do best and where they're not the best fit.
Yep, the customer would >sure< have to know in advance. If Susie is counting on the insurance salesman to discourage her from annuitizing every cent she's got, then she may be in for a shock.
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Old 10-16-2017, 03:47 AM   #74
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What annuities does best is provide you with guaranteed income...

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no one should buy any annuity product without delaying social security first or no matter what you buy you shot yourself in the foot .



for what it costs to delay and lay out the money from yourself while waiting you cannot buy any commercially available annuity that gives you so much for so little

I think this is a big enough deal that I'd be tempted to use it for part of my "smell test" as recommended earlier. "Um, what if I were to just delay my social security for the larger inflation-adjusted monthly income? Might I be as well, or even better off?" The FA's answer would likely be revealing.
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Old 10-16-2017, 05:16 AM   #75
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As long as it enriches an insurance agent it is all good, eh?
Susie has choices. She can go to a Captive agent who offers proprietary insurance products like NY life agents.. she can go to an independent insurance agent who will have a bunch of companies at his disposal but not all. He won't be able to sell NY life for example. Or as someone pointed out earlier .. she can go to the Vanguard insurance agency. At the end of the day, they're all evil because they're all get paid commissions.
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Old 10-16-2017, 05:18 AM   #76
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Yep, the customer would >sure< have to know in advance. If Susie is counting on the insurance salesman to discourage her from annuitizing every cent she's got, then she may be in for a shock.
Again ..I don't sell annuities so I may be wrong on this but I believe the insurance agent has to fill out a form that shows how many assets Susie has, The insurance company could reject if the annuity is too large of a portion of her asset. Again I may be wrong on this

The insurance agent has the incentive to sell more annuities. But like every business in America .. there is the disincentive of being too aggressive. When I go to Best Buy to buy a Kitchen Aid appliance .. and the salesperson tries to sell me a Thermador package, I'll take everything he says about Kitchen Aid with a grain of salt. In my opinion ..it's good to know what the incentive is. Unlike an advisor who tells you they don't have a conflict of interest... yet while you're trying to figure out if your withdrawal should be 3 or 4% . they take an extra 1%. This is what they call a fiduciary.. lol.. and of course they will tell you that it's better to keep the money in the market than pay down your house.. but they don't have a conflict of interest . They def don't want you to buy annuities.. because that lowers their "fee" ...which works just like a commission. But they are "fiduciaries"
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Old 10-16-2017, 06:27 AM   #77
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Again ..I don't sell annuities so I may be wrong on this but I believe the insurance agent has to fill out a form that shows how many assets Susie has, The insurance company could reject if the annuity is too large of a portion of her asset. Again I may be wrong on this
I have looked at buying different annuities (MYGA/SPIA/FIA) and the ones I have looked at have a form that you sign that states this is less than 50% of your liquid assets and that you have emergency funds.
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Old 10-16-2017, 09:10 AM   #78
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Susie has choices. She can go to a Captive agent who offers proprietary insurance products like NY life agents.. she can go to an independent insurance agent who will have a bunch of companies at his disposal but not all. He won't be able to sell NY life for example. Or as someone pointed out earlier .. she can go to the Vanguard insurance agency. At the end of the day, they're all evil because they're all get paid commissions.
Gee, dissemble much? I forgot, insurance agent.

Your suggestion that buying an annuity from a shop like Vanguard is the same as buying an FIA or ridered up VA from a sleazy insurance agent is laughably misleading. Let's call the average VA expense ratio through the sleaze factory at 3.5% annually. What is it through Vanguard? Varies, but the balanced fund option weighs in at .52% all-in expenses. The 3% difference is pretty huge, almost a full SWR on one's assets in fact.
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Old 10-16-2017, 09:15 AM   #79
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Again ..I don't sell annuities so I may be wrong on this but I believe the insurance agent has to fill out a form that shows how many assets Susie has,
If you don't sell annuities, why are you spending so much time here touting their virtues?? Shouldn't you be pushing costly whole life insurance instead?
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Old 10-16-2017, 10:22 AM   #80
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If you don't sell annuities, why are you spending so much time here touting their virtues?? Shouldn't you be pushing costly whole life insurance instead?
To people with short life expectancies, no less.
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