fixed indexed annuity

R

Ralph

Confused about dryer sheets
Joined
Dec 31, 2010
Messages
7
Location
bridgeport
Hello everyone, I'm looking for some advice about a fixed indexed annuity I might soon purchase. My place of employment is in bad shape and my boss told me that he can't keep me much longer. So I'm considering retiring. I will be 64 in May. Been there for 47 years. I have no retirement at work. But I did save all thoses years and have $300,000 to invest in retirement. At first I was going to go with an immediate life annuity but the thought of giving my life savings away, never to see it again made me stop and think. I visited the financial advisor at my bank. After telling her what I'm looking for is income to supplement my SS she said "a Jackson fixed indexed annuity" would give me just that. Guaranteed 5% interest monthly (for the term I choose) plus the possibility of my monthly interest going up if the S&P 500 improves. I'll never go below 5% if the market goes down. And, after the term is up I can take 100% of my initial premium and do what I want with it or reinvest it again at possibly a higher rate. Even though the immediate life annuity would give me $600 more a month to live on, getting ALL my money back in 7 years makes it sound pretty good. I still can make it on $600 less. Does anyone know if this is a good plan? I know nothing about investing in stocks so I'm a bit worried about this type of annuity being tied to the stock market. I worry about the company going under and losing my money even though the state backs it up. Losing a lot sleep over this. It's going to be sooooooo hard to give my life savings away. I've even thought about drawing on the $300,000 to last me for about 20 years but after that I'd be out of money except for SS. Old folks home ....maybe:) Thanks for any advice.
 
Ralph said:
Hello everyone, I'm looking for some advice about a fixed indexed annuity I might soon purchase.
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The best advice you'll get here -and you'll get it over and over - is do NOT buy an indexed annuity. You are being sold something that will benefit the seller much more than you.

Several others will be along shortly to elaborate. While you wait you might find this thread from a few weeks ago to be informative: http://www.early-retirement.org/forums/f28/fia-looks-like-just-what-i-need-53618.html
 
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Mel Lindauer of Bogleheads fame did a series of articles in Forbes summarizing annuities of all flavours. Here is his take on indexed annuities: The Truth About Equity-Indexed Annuities - Forbes.com

His take - an excellent investment...for the salesman and insurance company.

Because of all of these negatives, we suggest you just say "No" when someone tries to sell you an Equity-Indexed Annuity. Then turn around and run, don't walk away.
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DD
 
DON'T BUY THIS PRODUCT!!!

Take your time, read some books to get educated, do some research, and THEN decide what to do. This is your life savings we are talking about. Be very, very careful.
 
Ralph, Don't buy this. Your description suggests that not only do you not understand how it is ripping you off, but the person at the bank does not understand how it is ripping you off either.

Unfortunately, you are going to have to take a few weeks or months of reading and research to figure out what to do. Go slowly. Nothing is gonna happen in a few months that will hurt you except one thing: Going out and buying this annuity or another one like it.
 
You need to start with how much yearly income will you need to support yourself (including health care).

Then consider your assets, income sources, etc.

Below is a link to a thread on Otar's book that many in this forum believe to be a good overview of popular options and what they mean. It can be downloaded for free right now.

He gives a good overview of the trade-offs for a number of investments and investment styles. He includes some information about different types of annuities. It is worth a read.


Otar: Unveiling the Retirement Myth



SPIAs payouts for a given amount of money are tied to interest rates. Right now the fed is holding rates artificially low. You might want to consider that information in terms of the timing of the annuity purchase. Some buy annuities in a ladder fashion to achieve a higher average payout. One bit of advices is to stick with highly rated insurance companies.


IMO - One of the best deals out there for most of us is to delay taking SS till at least full retirement age (FRA)... better yet till 70. At 70, you should get around 130% of what you would be FRA and it has a COLA. I doubt you could purchase the equivalent on the open market.

If you get laid off... you should be in for unemployment. So hopefully that will get you by for a while... if you are out of debt, that will help.


Take your time and think about it. Get a spreadsheet and do some calculations and consider your options. Buying an annuity is a permanent decision

For example:

Would it be a better deal if you spent your assets and deferred taking SS till 70?

If you buy a SPIA, do you invest it all or part of it?



You can get a rough idea of what annuities are paying by getting a quote here: http://www.immediateannuities.com/

A single life SPIA quote for $300k for a 64 year old male would yield an $1,800+ monthly payout. The $600/mo you mentioned seems to be a bad deal compared to that quote.
 
Ralph said:
Does anyone know if this is a good plan?
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Probably not.

You really haven't given us enough information to analyze this thing. What is the minimum term you can select? What is the participation (interest rate enhancement) if the S&P 500 rises by X%? I suspect it is a fairly low number unless you choose a long term, in which case it will almost assuredly be a bad deal for you.

What is the minimum amount of $ per month that you need? There's nothing wrong with putting the 300K in something very safe (e.g. short-term CD's or a CD ladder with money maturing every 6 months over the next 2-3 years) while you learn more about investments. Please remember, most serious investment mistakes are made by acting too quickly. You have plenty of time to "get this right".

Welcome to the ER forum. There's lots of potential good information here which you can learn by reading the posts and asking questions.
 
Welcome Ralph, look at it this way. Do you think the broker at the bank and the insurance company he/she is using has this product for your benefit?
 
Welcome Ralph. I agree with others suggesting to take a step back and don't do a knee-jerk move. A rule of thumb in investing is to not invest in anything you don't understand. So, take your time to decide if what you choose to do really is what you need/want to do.

47 years of working. Wow.. Congrats to you on this.
 
Run away from indexed annuity products. An SPIA *might* be appropriate for part of your savings to lock in some income you can't outlive, BUT bond rates are so low now that this would be a lousy time to buy -- a bit better than a couple months ago, but by historical standards, the price of a lifetime income stream is still very high.

There is no need to rush this. Educate yourself, stay away from advisors pushing high-fee products, and proceed with caution after learning the ropes.
 
mickeyd said:
Hey there Ralph. How long have you been an annuity salesman?
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Ralph might need a little slack here. The annuity salesmen usually don't take the time to fill out their personal profiles to the detail that Ralph did.

But, yeah, it would be great if vBulletin included a public tool to let the posters compare each other's IP addresses to the membership roster...
 
Well, if this would be an example of how you would select you customer base, I don't think sales would be for you. :) Now if you were advertising dryer sheets here, you might have hit your target.
 
Whether the OP is a salesman or not, I'm curious about one thing. I would be more than willing to buy one of these critters if I can get that "guaranteed 5% monthly" item in writing. I'm the proud :mad: owner of a Jackson FIA from back in my more ignorant years, and I believe my guarantee is 6.5%/year. Obviously annuities are a much better deal these days. :angel:
 
My thanks to all that have replied. It looks like the verdict is in.....don't purchase the annuity. But what do I do? I will be losing my job soon. Finding another job at 64 in my part of the country (Ohio) will be a chore to say the least. I talked to my buddy last night at a New year's Eve party who invests heavily in the stock market. He told me that he lost $5,000 in one week a while back but was able to make that up and then some. He is a retired teacher with SS and a pension from the state. He said "don't buy" also, but invest in the S&P 500 by myself. But I'd be gambling with my income I told him and what happens if the market goes down again and it looks like we are going to take another hit with the predicted $5 a gallon gas prices. I'm considering the fixed indexed annuity so I will have a steady stream of income at low risk. My buddy said "low risk, low return". But I'm not worried about making more money I just need income so I can get out of the place I'm working at now. I have lost everything. No more health insurance, vacations, sick days. Plus I have taken two pay cuts so far. When I go to work Monday morning I have absolutely nothing to do. I have to act busy. I create problems with the printing presses just so I can fix them to act busy. The days are sooooooo long. I'm always in a bad mood now says my wife. BUT, on the other hand I'm soooo lucky I haven't been laid off...yet. I do everything in the shop. Fix the roof. Fix the toilets, presses, computers, delivery van etc. When the boss is sick or on vacation I take over. So he needs me and I'm guessing that's why I'm still there. 11 others are history. I just HAVE to get out of there. I know I'm going to be used to make money for the insurance company but is there anything else I might consider at low risk? The term for the annuity I was advised to take was 7 years. Then I get 100% of my money back to do what I want with it. I will be going to SS on Wednesday to see where I stand with them and then to the bank to talk to the advisor about the annuity. Then I have some "hard thinking" to do. I didn't know retiring was going to be so hard. I was hoping that someone had an indexed annuity to let me know how it was doing for them. Going to check out now some of links now that you have provided. A BIG "thank you" to everyone.
 
Ralph, I think you will also get unemployment $ once they let you go and that should help out for a while. Right now you can collect for 99 weeks.

Pen Fed had a 5% CD a while back and may come up with another good deal this month. Keep checking the web site.

If you spend some time reading the Annuity I'm sure there are issues in there that you won't want to deal with. Remember, you'll be paying a broker and the Ins Company. I would stay away from the annuity salesperson.

There's a saying that someone on this forum used. Annuities are sold not bought.
 
Ralph, I would let the money stay in savings/CDs for now while you do the more important thinking about where you go from here. What are your expenses? What will you get if you file for Social Security? Are there any life changes (relocate, pursue a business or part time job, etc.) you would make when you retire? Before you decide what to do with your savings you should figure out what you want to do with the rest of your life, what your expenses are, and how much you might be able to cover from SS, part time work and other sources of income. If you can hang in there until you are 65, you will be eligible for Medicare and not have to worry about health insurance for yourself (dunno how old your wife is). Figure this stuff out, then move on to the investment side.
 
Ralph,

Look at it this way. A savings account/CD/Money Market accout is a GREAT place to park your money while you figure out what you really need to do.
 
Ralph said:
My thanks to all that have replied. It looks like the verdict is in.....don't purchase the annuity. But what do I do? I will be losing my job soon. Finding another job at 64 in my part of the country (Ohio) will be a chore to say the least. I talked to my buddy last night at a New year's Eve party who invests heavily in the stock market. He told me that he lost $5,000 in one week a while back but was able to make that up and then some. He is a retired teacher with SS and a pension from the state. He said "don't buy" also, but invest in the S&P 500 by myself. But I'd be gambling with my income I told him and what happens if the market goes down again and it looks like we are going to take another hit with the predicted $5 a gallon gas prices. I'm considering the fixed indexed annuity so I will have a steady stream of income at low risk. My buddy said "low risk, low return". But I'm not worried about making more money I just need income so I can get out of the place I'm working at now. I have lost everything. No more health insurance, vacations, sick days. Plus I have taken two pay cuts so far. When I go to work Monday morning I have absolutely nothing to do. I have to act busy. I create problems with the printing presses just so I can fix them to act busy. The days are sooooooo long. I'm always in a bad mood now says my wife. BUT, on the other hand I'm soooo lucky I haven't been laid off...yet. I do everything in the shop. Fix the roof. Fix the toilets, presses, computers, delivery van etc. When the boss is sick or on vacation I take over. So he needs me and I'm guessing that's why I'm still there. 11 others are history. I just HAVE to get out of there. I know I'm going to be used to make money for the insurance company but is there anything else I might consider at low risk? The term for the annuity I was advised to take was 7 years. Then I get 100% of my money back to do what I want with it. I will be going to SS on Wednesday to see where I stand with them and then to the bank to talk to the advisor about the annuity. Then I have some "hard thinking" to do. I didn't know retiring was going to be so hard. I was hoping that someone had an indexed annuity to let me know how it was doing for them. Going to check out now some of links now that you have provided. A BIG "thank you" to everyone.
Click to expand...

Ralph, I question the applicability of your buddy's advise to your situation. Most retired teachers have very good pensions and health benefits. IF that is the case for your buddy, he can likely afford to take more risks with his invested money since he may have the pension and benefits as his fall back position. In your case your savings is all you have so your risk is much higher than his.

Tom
 
chinaco, I have been doing what you suggested for the past year or so. Waiting til 70 to retire is not an option. I have to go soon. No work and unemployment is staring me in the face. I'm willing to let the insurance company make money on my money IF I get a guaranteed monthly income for the next 7 years. My bank advisor told me that Jackson Insurance will deposit $1500 into my account every month and possibly more if the S&P improves and it will be in "writing". I'm not interested in making more money anymore. Just wondering if anyone has done this and how things are going for them.
 
+1 on Brewer's comment.

Hang on the job as long as you can. You said you are tired of it... but at 65, you will qualify for Medicare which is important.
 
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