Variable Annuity, Has anyone purchased and why?

[Grammymissy]

We are considering a variable annuity for a portion of our retirement income, and since we are going to travel quite a bit internationally we will not have time to manage our funds too closely. This product appears to be a good choice for funds to sit and grow, until we are ready to turn on income stream, with little management. I am interested in hearing from anyone who has purchased a variable annuity, and what was their reasons. Thanks!

 

[brewer12345]

Do yourself a favor and run away from this product and all like it.

 

[RunningBum]

Watch out for high fees, and return of capital masked as part of the annual return rate.

How about a Target Retirement Fund from a low cost company like Vanguard or Fidelity? You could just invest and forget. Or even a simple mix of a total stock market, total international, and total bond fund should take very little of your time to manage and can be done anywhere you have internet access. Rebalance once a year or even less often.

 

[jerome len]

variable annuities are very expensive. I'd call Vanguard and ask for their opinions and costs of an annuity vs a target retirement fund. Or.....I'd ask about a fixed annuity purchased now but payments held until you need the money. You have lots of options and usually the most expensive option is the worst one in the long term.

 

[pb4uski]

We are considering a variable annuity for a portion of our retirement income, and since we are going to travel quite a bit internationally we will not have time to manage our funds too closely. This product appears to be a good choice for funds to sit and grow, until we are ready to turn on income stream, with little management. I am interested in hearing from anyone who has purchased a variable annuity, and what was their reasons. Thanks!

There are lots of investments that you can leave alone and not have to spend a lot of time managing if that is your objective that would NOT have the fees and expenses associated with a variable annuity.

For example, you could buy a good, no-load, low cost balanced mutual fund like Wellesley, Wellington or a target date fund and let it sit and grow and then later use that money to buy a single premium immediate annuity.

I think in most cases you would end up with a higher monthly benefit than buying a VA with a similar asset allocation and then annuitizing it.

Is this in a taxable account or a tax-deferred account (like an IRA)?

 

[Chuckanut]

You can invest in Pssstt Wellesly or Ahhhhh Wellington for a lot less in fees. Just let the income and gains ride until you need the money. When the time comes that you need the money, tell them to send you $x,xxx a month. Just make certain you set that number so you don't run out of money before you both run out of time.

Enjoy your traveling! What a great way to spend ER.

 

[samclem]

How about a Target Retirement Fund from a low cost company like Vanguard or Fidelity? You could just invest and forget. Or even a simple mix of a total stock market, total international, and total bond fund should take very little of your time to manage and can be done anywhere you have internet access. Rebalance once a year or even less often.

For example, you could buy a good, no-load, low cost balanced mutual fund like Wellesley, Wellington or a target date fund and let it sit and grow and then later use that money to buy a single premium immediate annuity.

I think in most cases you would end up with a higher monthly benefit than buying a VA with a similar asset allocation and then annuitizing it.

Yes to the above. VA's are high-cost investments that do nothing particularly well (except line the pockets of VA salesmen, which is why they push them so hard). In most cases, putting your funds into a well-chosen mix of low-cost index funds (or a single Target Date fund) and rebalancing only infrequently is >>better<< than constantly fiddling with the assets, buying and selling on the day's news. Checking on the balances and doing some shifting around once per year is all I do, and my results have been fine.

There's a place for some annuity products in certain situations, but (in my opinion) variable annuities are not useful for anyone.

 

[Midpack]

Just Google variable annuities and you'll find countless articles from a wide variety of sources recommending you steer clear. Only a VA salesperson will try to convince you to buy one, beware...

9 Reasons You Need To Avoid Variable Annuities - Forbes
3 Reasons To Buy a Variable Annuity - NASDAQ.com

 

[Ready]

Because VAs are complex financial instruments, the only people who are really qualified to buy them are those who research them thoroughly and fully understand all of the nuances of the investment prior to purchasing.

The problem is, anyone who actually learns enough about them to achieve a full understanding of them becomes most qualified to educate the rest of us on how awful they really are. So the more you educate yourself, the less desirable they will be to you.

Or, you could just take everyone's advice here and forget the whole thing, as most people who spend time on this forum have done.

 

[Grammymissy]

I understand that the funds we have earmarked for a variable annuity could be invested elsewhere, perhaps just as easily. However since these funds are being set aside for the later years, for elderly care and or housing, I like the idea of the income stream for life, and then death benefit is paid. . Our living and traveling expenses are being funded by our pension and savings, and then ss in approximately 10 years when husband turns 67. Retiring at 51 and 56 means that , hopefully we will have many years ahead of us, and lifetime benefits is appealing.

 

[REWahoo]

I understand that the funds we have earmarked for a variable annuity could be invested elsewhere, perhaps just as easily. However since these funds are being set aside for the later years, for elderly care and or housing, I like the idea of the income stream for life, and then death benefit is paid. . Our living and traveling expenses are being funded by our pension and savings, and then ss in approximately 10 years when husband turns 67. Retiring at 51 and 56 means that , hopefully we will have many years ahead of us, and lifetime benefits is appealing.

History indicates you'll do much better (lower costs, higher return) by investing in a quality balanced fund. Once you think you are ready for those lifetime benefits, you can always use the appreciated investment to purchase a SPIA at a substantial savings (ie, greater income) vs. the fees buried in a VA.

Variable annuities are excellent products - but only if you are the insurance company or the salesman getting the commission check.

 

[samclem]

Most of the people who are on this board were in, or are now in, your situation. We considered various investments, including annuity products. If you have the time, do a search of the previous postings here on VAs, in a very short time you'll learn a lot about them, and why virtually everyone here has found far better ways to achieve their objectives--objectives much the same as the ones you outlined.

Run away from VAs. And if there's someone trying to sell you one, do NOT feel bad about being blunt with them. They are putting their own interests ahead of yours.

 

[Ready]

I understand that the funds we have earmarked for a variable annuity could be invested elsewhere, perhaps just as easily. However since these funds are being set aside for the later years, for elderly care and or housing, I like the idea of the income stream for life, and then death benefit is paid. . Our living and traveling expenses are being funded by our pension and savings, and then ss in approximately 10 years when husband turns 67. Retiring at 51 and 56 means that , hopefully we will have many years ahead of us, and lifetime benefits is appealing.

Annuity salespeople look for folks like yourself to make their living on. I don't know what else we can tell you here other than what has already been said...that VA's are a complete scam, ripoff, terrible investment. Nobody who understands them would ever buy one. If that isn't enough to make you think twice, I'm not sure what else can be said.

 

[MRG]

Annuity salespeople look for folks like yourself to make their living on. I don't know what else we can tell you here other than what has already been said...that VA's are a complete scam, ripoff, terrible investment. Nobody who understands them would ever buy one. If that isn't enough to make you think twice, I'm not sure what else can be said.

True. My father sold them, but told me never to buy.

MRG

 

[clifp]

To hop on the bandwagon. There is a wide variety opinions on the forum from everything from the best brokerage, Obamacare, to who is going to the World Series.

At least 90% and perhaps 95% of the forum believes that variable annuity are horrible product unless you are a variable annuity salesman, and have 3 kids who you need to put through college. In which case they are great products.

If you are looking for lifetime income they are many options include immediate annuities but variable annuities are among the worst option.

If you are not convinced after doing some research these are bad ideas go ahead and post the name of the variable annuity and we can provide more detail.

 

[RunningBum]

I understand that the funds we have earmarked for a variable annuity could be invested elsewhere, perhaps just as easily. However since these funds are being set aside for the later years, for elderly care and or housing, I like the idea of the income stream for life, and then death benefit is paid. . Our living and traveling expenses are being funded by our pension and savings, and then ss in approximately 10 years when husband turns 67. Retiring at 51 and 56 means that , hopefully we will have many years ahead of us, and lifetime benefits is appealing.

Well, keep trying, maybe you can find someone to give you positive reinforcement on what you've already decided to do. But very possibly not here!

Consider holding off on SS as late as possible as a way of maximizing the SS "annuity" for long-life protection. The strategy for couples isn't so simple so look deeper into that.

 

[Grammymissy]

Thank you for all of your responses, it is obvious to me that even if someone purchased a variable annuity, they would not admit on this website. And since my question was for someone who has purchased a variable annuity, i will move on. We are in the research phase, so we will continue researching elsewhere. No worries

 

[clifp]

Actually plenty of people on the forum of have purchased variable annuities. Not all of them regretted but I'd say most have.

I am curious what it is about the product that appeals to you, more than say a fixed annuity, or regular mutual funds, or a manage payout fund, all of which can provide income for life.

 

[Johnschanzer]

Annuities

I have checked into different annuities, after 35 years of investing in mutual funds and doing quite well financially. When the market peaked in 2013 I did not want to worry about losing what I have gained. We transferred 80% of or retirement into a fixed index annuity with Allianz with a 360 rider. Yes the fee is high 1.05% but we are guaranteed to have a great income for the rest of our lives with no fear of loss from the market, plus the income can go up but never down. I have 7 years before I retire and still invest 23% of my income in mutual funds that will be a plus if the market continues up but won’t be a burden if the market goes down.

 

[samclem]

I have checked into different annuities, after 35 years of investing in mutual funds and doing quite well financially. When the market peaked in 2013 I did not want to worry about losing what I have gained. We transferred 80% of or retirement into a fixed index annuity with Allianz with a 360 rider. Yes the fee is high 1.05% but we are guaranteed to have a great income for the rest of our lives with no fear of loss from the market, plus the income can go up but never down. I have 7 years before I retire and still invest 23% of my income in mutual funds that will be a plus if the market continues up but won’t be a burden if the market goes down.

So, is the index one that goes up with inflation? If not, then I'm sure you understand that you've only traded market volatility (which has historically moved prices in both directions, and overwhelmingly in the "right" direction for investors over time) for inflation risk (which has generally moved in one direction in the US, a direction that does not favor fixed income investments). If we get 10 years of 8% inflation, how will that "payout can't go down" guarantee from Allianz help the owner of one of these products?

You say you are still working and investing, which is good. Keep socking away that money into something that offers the potential for keeping up with inflation, it might come in very handy. Plus, you'll have resources on hand to handle big expenses/desired spending that exceed the monthly stipend Allianz will send you.

Welcome to the board!

 

[REWahoo]

We are in the research phase, so we will continue researching elsewhere. No worries

Your posts indicate you aren't researching, simply seeking validation and rejecting anything that doesn't support your decision. That does lead to "no worries" - at least until you find out the hard way what's in all that fine print in the 75+ pages of the VA agreement.

 

[Grammymissy]

Thank you John schanzer for your response, you are a risk taker admitting on this board that you purchased an annunity. I asked a question, of annuity buyers and for some reason I am attacked by a moderator who says that I have already made a decision? Moderator rewahoo please delete this thread since it offends you so, and bless your heart.

 

[REWahoo]

First, if you look at my avatar you'll see the "emeritus" designation - as in "former" mod. Sorry, can't help you with deletion.

Second, if you view my post as an attack you may need to reconsider posting on internet forums. People will disagree with you and hold up a mirror to your posts.

 

[Bestwifeever]

Thank you John schanzer for your response, you are a risk taker admitting on this board that you purchased an annunity. I asked a question, of annuity buyers and for some reason I am attacked by a moderator who says that I have already made a decision? Moderator rewahoo please delete this thread since it offends you so, and bless your heart.

I don't think anyone attacked you. I do think you have received a lot of thoughtful advice from folks who considered annuities and decided against the variable annuity. I don't know why their responses would not be helpful. You would find more support for the SPIA but you do not seem to be interested in that, and your reactions do seem to indicate that you want confirmation of a decision you have already made.

Where else have you researched this topic?

 

[pb4uski]

I don't think anyone attacked you. ....

+1 and if you perceive the posts as attacks, you should probably not be posting to internet forums because this forum is very polite compared to most others.

Most of the input you are receiving are from experienced investors who have at one time considered investing in a VA as you now are but ultimately decided not to or people who currently or previously owned VAs and are not fans of the product.

As for me, I worked in the insurance industry for 25 years including a company that issued VA products and I'm just not a fan.