question about annuities

[steve2470]

YES, I know, I need to talk to my financial guy.

Which is part of the problem.

He (the financial guy) seems very very biased against annuities. I get it, there is NO flexibility. Once you sign on the
dotted line, your cash is gone to XYZ Insurance Company.

I am NOT seeking the final answer here, only more info. I know I have options. However, annuities look damn good.

Thanks for your time.

[SheilaT]

1. It is my opinions that annuities can be a very good part of a person's investment portfolio.

I have a couple of them, purchased about two years ago. I will probably start taking money from them in three to five more years.

Mine both have a guaranteed payout for the rest of my life, so I can't outlive that money. Once I start collecting, the amount I can collect is then fixed for life.

I have just turned 65.

As with so many things, there are an infinite number of variables relating to your age, when you start collecting, what sort of interest rate they guarantee and a host of other things.

I suppose you could also do research on-line, but I wonder if the public library might be a slightly better source.

Oh. Probably the most important advice will be that you NOT invest every penny into an annuity.

[A HERETIC I AM]

2. It is my experience and opinion that they are PERFECT for some and horrible for others.

The best way to think about them is basically investing in Mutual Funds wrapped in an insurance policy AND taking a sum of money and turning it into an income stream.

They can guarantee a stream of payments for a specific time (called a "Period Certain" annuity - as an example, the Powerball Lottery payout scheme is a period certain annuity - 29 years) or life. Some also offer a "Step Up" provision in which the withdrawal base is increased regardless of what the market as a whole does. This effectively allows for an annual increase in the payments made to you.

This quote:

I get it, there is NO flexibility. Once you sign on the dotted line, your cash is gone to XYZ Insurance Company.

is not entirely accurate. It is gone for as long as you want them to have it! BUT.....Almost all annuities come with a "Surrender Period". That means the Insurance company is going to charge you a percentage of the balance if you want your money back. If you want to Surrender the annuity. It is always a sliding scale, starting year one with the highest percentage and going down from there. Some as short as 3 years, some as long as 12. Keep this in mind; The longer the surrender period, the better the commission for the broker.

There are fixed annuities and there are variable ones. Fixed are just that - the sum is fixed, the payout is fixed, etc. Low risk, low reward.

Variable annuities are just that - variable. Typically invested in a way that allows the balance to vary, both up and down in value by investing in securities that change in value, such as mutual funds. They can be very aggressive portfolios or very conservative ones. Most Variable Annuities will allow changes in investment portfolios. You can change it from conservative to aggressive along the way, it just depends on the issuing firm and the rules pertaining the the specific annuity.

It's good that your broker is skeptical. That shows he does have your interests in mind.

They can be an excellent place for a portion of your assets. Your age and other factors determine how large of a portion it should be. Typically the older you are, the safer it is to increase the portion, all the way to 100% if needed.

Here is an answer I gave on the old DU to a related question.

I hope that helps a little.
If you have more specific questions, just let me know.

[steve2470]

3. his initial proposal would not have accounted for inflation

He got a big black mark in my book for that. I'm giving him a last chance for a proposal that accounts
adequately for inflation. If not, I'm going elsewhere.

Thank you so much for your time.

[A HERETIC I AM]

4. May I suggest you go to several Insurance company annuity sites directly....

and read up on them in more detail.

Here's some of the larger ones for starters;

Pacific Life

ING

New York Life

The Hartford

John Hancock

Met Life

Disclaimer; I have sold a Pacific Life Annuity to a former client when I was a broker and I sold an ING one to my mother. The ING Annuity for mom is doing exactly what it was supposed to do, is doing fine and was purchased in late 2008 as the market was almost bottomed out.

Edit to add that I have no idea how the Pac Life one is doing as I am not privy to that persons account any longer!

[steve2470]

5. ok thank you nt

[Common Sense Party]

6. What did you ever decide about annuities?

Just curious.

[steve2470]

7. my advisor put me in one in addition to other investments

Thanks for your time !

[Common Sense Party]

8. Cool. I missed your thread when you originally posted it.

I was an annuity geek in a former life, I would have chimed in had I seen it.