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01-07-2008, 01:14 PM
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#21
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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Quote:
Originally Posted by haha
I think we should be prepared to look closely and with an open but careful mindset at any of these innovations. Actuaries are smart but not perfect; risks do get mispriced in the early going. Look how cheap LTC insurance started out.
We have a tendency to say "Bah, humbug!" Usually but not always a good stance.
Ha
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There is some worry that the insurers aren't reinsuring the risk adequately enough. Time will tell.
The main sticking point for most will be cost. These annuities have expenses between 2.5 and 3% a year. If Vanguard offered this on their annuities, they would have to charge an extra 50-75bp a year, something I don't think they want to do............
__________________
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.........:)
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01-07-2008, 05:59 PM
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#22
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Full time employment: Posting here.
Join Date: Oct 2003
Posts: 961
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Quote:
Originally Posted by FinanceDude
There is some worry that the insurers aren't reinsuring the risk adequately enough. Time will tell.
The main sticking point for most will be cost. These annuities have expenses between 2.5 and 3% a year. If Vanguard offered this on their annuities, they would have to charge an extra 50-75bp a year, something I don't think they want to do............
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FD,
Since you may get the chance to meet Milevsky, you may want to ask his opinion on this. IIRC, he thinks the insurers aren't charging enough.
- Alec
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01-08-2008, 08:35 PM
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#23
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Confused about dryer sheets
Join Date: Oct 2007
Posts: 9
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While this product is somewhat better than the other junk Ameriprise offers, you still have some pitfalls with this option. First of all, you must use their preset portfolios in their portfolio navigator. Also, the cost of the SecureSource option can increase at their discretion. Also, you still have to pay the over-priced fees associated with the annuity and the SecureSource option adds to this cost so if you own the annuity at an early age this will add up over time.
Secondly, they're pitfalls that can cause the amount of interest paid out to you decrease. This can happen in a few ways. If you're invested in anything above moderate-aggressive and you pull out any money the principal they base your payment on can decrease thus the amount to you will decrease. Also, if you pull out more than the 6% during the payout phase your policy will reset.
Also, if you purchase the policy and you're above 65 you have to wait three years before you can start drawing the 6%. Also, you're taxed on the amount received as ordinary income. Lastly, if I read this correctly it's up to you to notify Ameriprise if you want to step up the policy -- i.e., the policy value has increased thus you're entitled to an increased benefit.
If someone is interested in a policy like this, I wouldn't recommend it unless you're 60 years or older.
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01-09-2008, 07:42 AM
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#24
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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Quote:
Originally Posted by amerijunk
While this product is somewhat better than the other junk Ameriprise offers, you still have some pitfalls with this option. First of all, you must use their preset portfolios in their portfolio navigator. Also, the cost of the SecureSource option can increase at their discretion. Also, you still have to pay the over-priced fees associated with the annuity and the SecureSource option adds to this cost so if you own the annuity at an early age this will add up over time.
Secondly, they're pitfalls that can cause the amount of interest paid out to you decrease. This can happen in a few ways. If you're invested in anything above moderate-aggressive and you pull out any money the principal they base your payment on can decrease thus the amount to you will decrease. Also, if you pull out more than the 6% during the payout phase your policy will reset.
Also, if you purchase the policy and you're above 65 you have to wait three years before you can start drawing the 6%. Also, you're taxed on the amount received as ordinary income. Lastly, if I read this correctly it's up to you to notify Ameriprise if you want to step up the policy -- i.e., the policy value has increased thus you're entitled to an increased benefit.
If someone is interested in a policy like this, I wouldn't recommend it unless you're 60 years or older.
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Ameriprise has a big marketing budget, but their proprietary annuity company, Riversource, leaves a LOT to be desired............
__________________
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.........:)
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Compare to Inflation adjusted annuities at Vanguard/AIG
01-11-2008, 02:56 PM
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#25
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Recycles dryer sheets
Join Date: Jan 2008
Posts: 84
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Compare to Inflation adjusted annuities at Vanguard/AIG
I plugged in the variables noted in the above posts:
(see link below)
Starting amount $100,000
Age 68
Assumed gender was male (sorry if wrong)
The inflation adjusted payout $6509 per year.
Without inflation adjustement, the payout was $8700 per year.
I haven't been able to review all the above in detail. But, based on the numbers from AIG, receiving $6K, that is NOT inflation adjusted sounds like a bad deal for an initial investment of $100,000.
I suppose the cancellation option is a benefit. But, I thought the whole point of the annuity was to lock in a stable income as one component of one's retirement assets.
Here's the link.
Vanguard Lifetime Income Program -- Request a Quote
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01-11-2008, 06:05 PM
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#26
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
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Getting more expensive?
Did anyone keep quotes from Vanguard/AIG from last Jan-Feb, and compare them to now? 10 to 20 year TIPS were kissing 2.75 real coupon back then, and have shrunk dramatically since.
Do the quotes reflect this change?
Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
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Unsure of relation of AIG annuities to TIPS
01-12-2008, 06:25 PM
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#27
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Recycles dryer sheets
Join Date: Jan 2008
Posts: 84
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Unsure of relation of AIG annuities to TIPS
Not sure whether the question below was directed to the annuity quote I pasted in, but I'll reply as best I can.
In brief, I don't know the formula for calculation of the annuities. It must involve numerous factors such as life expectancy, interest rates, market predictions, and is likely highly proprietary.
Over the various quotes I've gotten, I've tried to get a sense of the quotient of the original investment amount over the inflation-adjusted annual income it yields, as a function of age.
My rough obervations, using a monthly payout:
Age: Ratio of lump sum to resulting annual payout:
48 23.5
50 22.5
55 17
60 about 14.5 (corresponds to about 6.9%/year)
Obviously, the older you get, the smaller the ratio, and the larger the percentage of the original lump sum one receives each year.
So, under current conditions at 55, if you invested $ 1 mill, you'd get about $58,800 per year (or, just under 6%). Now, if AIG goes under, you have a very big problem. Hence, the problem with private insurance company annuities. What the likelihood of such a calamity is, I don't know.
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01-12-2008, 07:23 PM
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#28
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Recycles dryer sheets
Join Date: Oct 2007
Posts: 332
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I think the returns on an immediate fixed annuity are comprised of 3 things- investment earnings (interest), return of principal and the forfeit of premiums for those poor souls who died before recovering their investment. I think VG has the best annuities out there. I think the returns are tied to the 10 yr. Treasury which is down from the last few months.
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