- Joined
- Nov 27, 2014
- Messages
- 9,325
Note to OP - two things:
1) Take the advice of the people in this thread and take time to learn before you buy. As you can see just from this discussion, the financial instrument you're looking into is complicated.
2) Your friend may and probably is still your friend. If a friend sells you a car and makes a commission, that's not something I would say is out of bounds. Also, and more important, your friend may be trying to sell you something he really believes in. As you can see from this conversation, there are at least a couple ways to look at annuities. Your friend can be of good heart and just be wrong. That doesn't make him a bad person.
I dealt with a very good guy and actually bought a small annuity from him. I always tell my friends that want to learn craps to come with me and put some money down and you'll see how the game is played. In that regard, I put $40K into something I knew little about. Time passes and I learned a few things. First, the person I dealt with was and is sincere but I have no illusions as he pulls up in his BMW that he's not making money. However, in his sincerity, he was correct in understanding that I did want a product that reduced or eliminated risk of loss. There may have been other ways to get it, but he achieved that goal. He sold me something from a very well rated very large and conservative company and I'm comfortable that goal was met. Second, while it is true that the balance of the annuity (or cash value) goes up based on an index, something else very interesting happens. The longer you wait to take the money, the larger the monthly annuity will be (this is where the life expectancy factor comes in). In my last statement, the balance only went up about 1.25 percent (fees took half the income) but the monthly payout went up 6.6 percent. Accordingly, I think a couple things - it is fair to compare this to a CD more so than an investment (stock/bond fund) and it's to be considered within the totality of your overall asset allocation. On the upside, I may have guaranteed that I can buy beer when I turn 80
Either way, live, learn and be careful.
1) Take the advice of the people in this thread and take time to learn before you buy. As you can see just from this discussion, the financial instrument you're looking into is complicated.
2) Your friend may and probably is still your friend. If a friend sells you a car and makes a commission, that's not something I would say is out of bounds. Also, and more important, your friend may be trying to sell you something he really believes in. As you can see from this conversation, there are at least a couple ways to look at annuities. Your friend can be of good heart and just be wrong. That doesn't make him a bad person.
I dealt with a very good guy and actually bought a small annuity from him. I always tell my friends that want to learn craps to come with me and put some money down and you'll see how the game is played. In that regard, I put $40K into something I knew little about. Time passes and I learned a few things. First, the person I dealt with was and is sincere but I have no illusions as he pulls up in his BMW that he's not making money. However, in his sincerity, he was correct in understanding that I did want a product that reduced or eliminated risk of loss. There may have been other ways to get it, but he achieved that goal. He sold me something from a very well rated very large and conservative company and I'm comfortable that goal was met. Second, while it is true that the balance of the annuity (or cash value) goes up based on an index, something else very interesting happens. The longer you wait to take the money, the larger the monthly annuity will be (this is where the life expectancy factor comes in). In my last statement, the balance only went up about 1.25 percent (fees took half the income) but the monthly payout went up 6.6 percent. Accordingly, I think a couple things - it is fair to compare this to a CD more so than an investment (stock/bond fund) and it's to be considered within the totality of your overall asset allocation. On the upside, I may have guaranteed that I can buy beer when I turn 80
Either way, live, learn and be careful.