One more time, variable annuities....

[Art G]

So, we're now in a situation that, provided the insurance companies keep their promise, wouldn't you rather be in a variable annuity with locked in value than in a mutual fund currently down in value?
It may all fail, but as it stands, my VA's are guaranteeing me income based on no lower than my highest watermark, and some VA's will even give a raise if the market rebounds.
Just curious if anyone, anywhere out there is reconsidering their hatred of the product? If not, why?

 

[REWahoo]

So, we're now in a situation that, provided the insurance companies keep their promise, wouldn't you rather be in a variable annuity with locked in value than in a mutual fund currently down in value?

No, absolutely not.

Just curious if anyone, anywhere out there is reconsidering their hatred of the product? If not, why?

No, for two reasons: 1) deep concern about that little "provided insurance companies keep their promise" qualifier and 2) conviction beyond a reasonable doubt that those who sell these products are at best, brainwashed, and at worst, [-]pond scum[/-] free-floating freshwater green algae.

 

[freebird5825]

i'm a fixed annuity holder. i like it because there are no surprises. the monthly check is always there with no wizardry involved.
i have no direct exp with VA, but i do know they are universally panned in retirement advice articles.
but if you are having a good experience with them, let's hear about it! that's why we're all here...right?

 

[Gumby]

Nope, still hate them. I would rather suffer a total portfolio meltdown than give even one dime to an annuity salesman.

 

[Sarah in SC]

Like Freebird said, if you are having a good experience owning VAs (versus having a good experience selling them), we'd sure like to know about it.

 

[FinanceDude]

Nope, still hate them. I would rather suffer a total portfolio meltdown than give even one dime to an annuity salesman.

Wow, that was positive..........

 

[laurence]

The sad part is a bunch of unknowing boomers are going to fearfully run into the arms of these VA sale vultures due to this market. "You will never lose money!" ..."who's AIG?"

 

[unclemick]

Being a smart ass - I call my 'annuity' Social Security and a small non cola pension.

heh heh heh - 40% of cash flow in retirement in good times and possibly waaaay more when I get in my cheap bastard mode.

Time and inflation will reduce the 40% as I need to spend while I'm not getting any younger.

Pssst - Wellesley = SEC yield 4.93% as of 10/3/08. per VG's website.

 

[CuppaJoe]

As the holder of an annuity from the defunct Executive Life Assurance Co. HATRED does not begin to express my attitude. But I will moderate myself and refer you to dozens of posts by 2B.

 

[audreyh1]

Seeing what happened to AIG?!?!?! Nope - really don't feel so "safe" about those annuity insurance products.

I love your qualifier "provided the insurance companies keep their promise". That's kind of a big hurdle!

Audrey

 

[Marquette]

Would that be an annuity with Hartford, getting an infusion from Allianz, or an annuity with Aviva, a company that just reported 30% of it's capital surplus wiped out, or maybe an annuity with AIG, a company selling their life business in the UK to pay off a certain bailout.

I just don't know, I guess I've got a penguin problem.

 

[ejman]

Hum lets see... Insurance companies invest more or less in the same muck as we all do - Actually worse since they have access to a lot of "sweet stuff" directly. But the facts are recent events have shown no geniuses there. So, they promise a return no matter what the market does. The market dives - where exactly is the money supposed to come from? Maybe more suckers buying their annuities.

 

[samclem]

But the rating companies tell us which insurance companies are okay and can be trusted. Not to be confused with the rating companies who told us all those MBS's and financial company bonds were solid.

 

[ejman]

But the rating companies tell us which insurance companies are okay and can be trusted. Not to be confused with the rating companies who told us all those MBS's and financial company bonds were solid.

Ah yes, the rating companies , the same folks that rated all of those wonderful financial products the whole world bought by the boatload based on their wonderful ratings... That are currently being reflected in a tummy pain or two. Yup

 

[audreyh1]

But the rating companies tell us which insurance companies are okay and can be trusted. Not to be confused with the rating companies who told us all those MBS's and financial company bonds were solid.

Good one!

Audrey

 

[shotgunner]

Tiaa-cref

Isn't the CREF side of TIAA-CREF essentially a variable annuity? If so there must be someone on this board who has used them both in accumulation and drawdown phase. Given TIAA's prevalence on college campus' and the fact 403B's associated with them are the primary retirement account for most in academia their meltdown would be huge. Is that possible?

 

[2B]

As the holder of an annuity from the defunct Executive Life Assurance Co. HATRED does not begin to express my attitude. But I will moderate myself and refer you to dozens of posts by 2B.

It's great having the right kind of reputation. Don't forget the Lutheran Brotherhood failure. I know a guy that went to his grave pissed at how much he lost in their failure.

I agree that when the dust settles there will be a lot of people sucked into the lure of "can't lose" investing. Of course, we all know that the insurance and financial companies have all learned their lesson and won't over-leverage ever again.

 

[Art G]

Nope, still hate them. I would rather suffer a total portfolio meltdown than give even one dime to an annuity salesman.

LOL! Yes, this is a healthy outlook. I figured some might say this. As an investor, I'm open to anything to grow or protect my wealth.

 

[ziggy29]

provided the insurance companies keep their promise

Given the current "situation" you are describing, don't you think this is a little too much of a leap of faith?

 

[ats5g]

So, we're now in a situation that, provided the insurance companies keep their promise, wouldn't you rather be in a variable annuity with locked in value than in a mutual fund currently down in value?
It may all fail, but as it stands, my VA's are guaranteeing me income based on no lower than my highest watermark, and some VA's will even give a raise if the market rebounds.
Just curious if anyone, anywhere out there is reconsidering their hatred of the product? If not, why?

Let's see:

1) The fees. Keep on paying north of 2% while I pay 0.15%.
1a) With those high fees, your upside is going to be no better than bonds, unless you're stilll smoking the crack pipe and think stocks are going to return 10% before fees.
2) Taxation. Keep on turning those capital gains and qualified dividends into ordinary income.
3) You can't tax loss harvest while I can.

 

[Art G]

Would that be an annuity with Hartford, getting an infusion from Allianz, or an annuity with Aviva, a company that just reported 30% of it's capital surplus wiped out, or maybe an annuity with AIG, a company selling their life business in the UK to pay off a certain bailout.

I just don't know, I guess I've got a penguin problem.

So far, AIG is still in existence and claims they will honor their guarantees. Supposedly these companies used hedging strategies like S&P LEAPS to protect themselves. For what it's worth, I've been buying AIG stock lately, I think they'll make it.
As to the insurance products themselves, the money is held completely separate from the general funds of the company itself.
The theory of the insurance company is that the living benefit will be paid out over a long period of time. Many of those recipients will die and thus never receive those benefits. Many will never need nor request them. For the first many years, they will merely be giving back the clients funds.
With all that said, if these insurance companies do fail, another insurance company would have to pick up the contracts and decide to honor the benefits. I have my doubts that any profitable company would wish to do this, HOWEVER, right this minute, it's a heck of a lot better chance of working than the guaranteed loss I'm viewing on my mutual fund statements right now.
For my money, I'd much rather have the chance of the benefit I paid for actually keeping their contractual obligation than knowing I have none at all.
For some really smart people on this board, I truly can't believe you are so closed minded that you wouldn't at least admit the benefits may be there.
For those interested, I'd be happy to explain further, but in all honesty, the products were better done BEFORE the market tanked. All JMO.

 

[Art G]

Given the current "situation" you are describing, don't you think this is a little too much of a leap of faith?

Yes, it is a leap of faith. That's why months ago I suggested only picking the strongest of companies. I've outlined in my last post why it may still work. Insurance companies have been around for centuries without going under. Obviously the gov't wants to keep them around.

 

[Art G]

Let's see:

1) The fees. Keep on paying north of 2% while I pay 0.15%.
1a) With those high fees, your upside is going to be no better than bonds, unless you're stilll smoking the crack pipe and think stocks are going to return 10% before fees.
2) Taxation. Keep on turning those capital gains and qualified dividends into ordinary income.
3) You can't tax loss harvest while I can.

I've always been willing to pay fees for service. I have auto insurance though I've rarely used it. I have home owners insurance though I've rarely used it. I have life insurance though....well I'm hoping not to use it.
There are also many services I'm willing to pay a bit more for.
Let me say this, if that 2% works out, it was one of the best bargains I've ever gotten.
I've got plenty of bonds and preferred stocks that are down to nothing. My GMAC bonds are currently valued at $28. Where's the value there?
The VA has a 7% annual step up towards income, regardless of market results.
Taxes, if the money is spread out over a lifetime it's not that much, and it beats the heck out of your capital loss.

 

[Marquette]

As the holder of an annuity from the defunct Executive Life Assurance Co. HATRED does not begin to express my attitude. But I will moderate myself and refer you to dozens of posts by 2B.

Did another insurer pick up your policy? Did you get any sort of cash settlement from the state's fund?

It's great having the right kind of reputation. Don't forget the Lutheran Brotherhood failure. I know a guy that went to his grave pissed at how much he lost in their failure.

Lost money from investing in them or buying their product? If it was a policy, wouldn't it still be serviced by Thrivent?

 

[REWahoo]

I've always been willing to pay fees for service. I have auto insurance though I've rarely used it. I have home owners insurance though I've rarely used it. I have life insurance though....well I'm hoping not to use it.
There are also many services I'm willing to pay a bit more for.
Let me say this, if that 2% works out, it was one of the best bargains I've ever gotten.

Art, do you ever stop quoting from the insurance sales manual?