What do You All Think About Fixed Indexed Annuities?

[JimBowie1958]

I have been thinking about them and I wonder who insures the insurers, but a person I know says he can sell me these things without a CAP, no penalties, no fees and a guaranteed growth of 2%.

Sounds too good to be true, but I though I would ask folks here to see what you all have to say.

A Beginner's Tutorial for Fixed Index Annuities — ImmediateAnnuities.com

Complete List of 200+ Index Annuities — ImmediateAnnuities.com

Fixed Index Annuity - Explanation of Fixed Index Annuities

https://www.myirionline.org/docs/de...exed-annuity-distribution-trends.pdf?sfvrsn=0

 

[defcon4]

I have been thinking about them and I wonder who insures the insurers, but a person I know says he can sell me these things without a CAP, no penalties, no fees and a guaranteed growth of 2%.

Sounds too good to be true, but I though I would ask folks here to see what you all have to say.

A Beginner's Tutorial for Fixed Index Annuities — ImmediateAnnuities.com

Complete List of 200+ Index Annuities — ImmediateAnnuities.com

Fixed Index Annuity - Explanation of Fixed Index Annuities

https://www.myirionline.org/docs/de...exed-annuity-distribution-trends.pdf?sfvrsn=0

Ask Toro (a.k.a. Toto) I am sure he wouldn't mind to give his opinion...

 

[JimBowie1958]

Hey Toro, you gotta some-ah advise to give-a on thissa topic?

(gesturing hands all around)

 

[MarathonMike]

Annuities are a long term commitment dude. You may want to talk to a higher authority than the geniuses on this message board

 

[JimBowie1958]

Annuities are a long term commitment dude. You may want to talk to a higher authority than the geniuses on this message board

The ones I have been looking at are either 6 year or ten year, and it fits in with the intended use.

Thanks for the heads up, however.

 

[defcon4]

Annuities are a long term commitment dude. You may want to talk to a higher authority than the geniuses on this message board

Toto is in finances and I think you should listen to his advice. Now, if he advises to invest with his firm, that should be a red flag...

 

[JimBowie1958]

Annuities are a long term commitment dude. You may want to talk to a higher authority than the geniuses on this message board

Toto is in finances and I think you should listen to his advice. Now, if advises to invest with his firm, that should be a red flag...

No, if he posts with the name "Toro" that should be a red flag.....

Nah, I think he has good financial advice, but then again, what the fuck do I know about anything? Nuttin!

 

[Toro]

Annuities are a long term commitment dude. You may want to talk to a higher authority than the geniuses on this message board

Toto is in finances and I think you should listen to his advice. Now, if advises to invest with his firm, that should be a red flag...

No, if he posts with the name "Toro" that should be a red flag.....

Nah, I think he has good financial advice, but then again, what the fuck do I know about anything? Nuttin!

Actually, I tend to be more bearish than bullish. Toro was the name of my soccer team when I was a kid.

I was a stock broker when I first started my career but I'm no longer a financial adviser, so I'm not really the guy to ask. I never sold annuities, though I was licensed to. Mac1958 may be a better guy to ask. I think he's a financial adviser.

I don't know a lot about these products, but when I was investing in insurance companies 15 years ago, I didn't really like index annuities. IIRC, they are an underlying bond and they write put options on the stock market indices. This creates a "negative skew," meaning that the tails of the left side of the distribution are really long. Or, in English, if the stock market crashes, the insurance company could have a huge liability for owing the obligation to buy the stock market at much higher prices after it has crashed, which could imperil the company. I don't know if any insurance company has gone insolvent from these products, but that would be my concern, especially with the stock market at extremely high valuations as it is now. But again, I don't really know a lot about them.

If I were looking to make 2% guaranteed return over the next 6 to 10 years, I'd just buy an investment grade corporate bond.

 

[Mac1958]

I have been thinking about them and I wonder who insures the insurers, but a person I know says he can sell me these things without a CAP, no penalties, no fees and a guaranteed growth of 2%. Sounds too good to be true, but I though I would ask folks here to see what you all have to say.

I was a stock broker when I first started my career but I'm no longer a financial adviser, so I'm not really the guy to ask. I never sold annuities, though I was licensed to. Mac1958 may be a better guy to ask. I think he's a financial adviser.

Yikes. Okay, here we go, and I promise I'll keep this as brief as I can:

1. As for "who insures the insurers", that's a good question. Most (but not all) states have something in place to protect consumers up to a point in the event of an insurance company failure. Colorado, for example, has the Colorado Insurance Guaranty Association, which protects consumers up to $300,000.

2. These things CAN be fine IF used PROPERLY and IN THEIR PLACE. You need to keep in mind that EVERY guarantee comes at the price of your flexibility. These things have "Surrender Charges", for example. That means, for the first 7 to 12 years, if you cash out, or if you take out more than allowed, you pay a penalty of up to, hell, 15%. But a lot of "salesmen" somehow "forget" to tell people that. This can only be for money that can be LEFT THERE.

3. I very, very, very much doubt there is an EIA with no caps. It would be the first in the history of EIAs. What they're telling you is that you can participate in full market gains with no risk of loss, your minimum being at 2%. Yes, that is indeed too good to be true. It ain't gonna happen. On their own, expect an EIA to make about 4.5% (+/-) over time. A bond replacement. That's it. And by the way - the annuity is not investing in the stock market. It's buying bonds and options.

4. These things have a bad reputation, and in many cases it is deserved, here's why: They require NO securities license to sell, only a life insurance license, so what do you think those guys are gonna do? They're gonna do whatever it takes to cram as much of your money into one of these things as they can. And while actual advisors like myself are paid commission streams of 1%, they usually take the one time commish of 7% to 9%. Yep. Hit & Run. I could tell you some nasty stories of people being suckered into paying a 7% Surrender Charge to be shoved into these things, and of 80+ year olds being put in EIAs with 22-year Surrender Charges. I could go on.

5. Their best (and really only, in my opinion) place is for money that you KNOW you will ONLY use for LIFETIME INCOME only. And remember, most of these provide a stream of STATIC income, the income does not go up with inflation. Some have an inflation component, but then you will start with at least 20% lower income. There are no free rides.

6. I'm working on a case for a new client right now, here's how it looks:

56 year old guy, big Yankees fan (good gawd, but I'm working with him anyway, he was referred), $800,000 IRA portfolio, plans on working until Social Security FRA (Full Retirement Age) of 66. Not very comfortable with the stock market any more, especially with the stagnation over the last couple of years and all the weird politics. But he knows he has to grow.

So we're putting $400,000 into a mix of conservative stock Exchange Traded Funds (ETFs), $100,000 into my firm's proprietary individual stock portfolio, and $200,000 into a corporate bond "ladder" which should help us ride up with interest rates.

The final $100,000 is being put into an EIA that will pay him a 7% bonus on funds invested, and guarantee a 6% return for the 10 years. Sounds great, right? Okay, it CAN be, but he ALSO knows that the various Surrender charges and restrictions means he can ONLY take a lifetime income with that money. We can't withdraw it or move it around. I've drummed into his head to think of this as a PENSION account. Set in stone.

In my mind, the EIA is a bond account. So he'll be 62.5% in stocks and 37.5% in bonds for a while, with an average bond return of around 5%. Pretty good.

That's just a brief overview. Let me know if you have any questions, I'm happy to help. And I'm gonna charge Toro for a fucking hour of my fucking time for this, dammit.


.

 

[Toro]

In lieu of an hour of your time, DWSBRZB LX Equity on your Bloomberg terminal.

You're welcome.

 

[JimBowie1958]

Mac, thank you very much for the reply.

1. As for "who insures the insurers", that's a good question. Most (but not all) states have something in place to protect consumers up to a point in the event of an insurance company failure. Colorado, for example, has the Colorado Insurance Guaranty Association, which protects consumers up to $300,000.

Yes, I think Virginia also has oen for that same amount.

2. These things CAN be fine IF used PROPERLY and IN THEIR PLACE. You need to keep in mind that EVERY guarantee comes at the price of your flexibility. These things have "Surrender Charges", for example. That means, for the first 7 to 12 years, if you cash out, or if you take out more than allowed, you pay a penalty of up to, hell, 15%. But a lot of "salesmen" somehow "forget" to tell people that. This can only be for money that can be LEFT THERE.

Yes, we just want an additional income stream that can stay even with inflation or better.

3. I very, very, very much doubt there is an EIA with no caps. It would be the first in the history of EIAs.

My bad, I misunderstood the guy in his presentation. They have a high cap, but they do have one.

4. These things have a bad reputation, and in many cases it is deserved, here's why: They require NO securities license to sell, only a life insurance license, so what do you think those guys are gonna do? They're gonna do whatever it takes to cram as much of your money into one of these things as they can. And while actual advisors like myself are paid commission streams of 1%, they usually take the one time commish of 7% to 9%. Yep. Hit & Run. I could tell you some nasty stories of people being suckered into paying a 7% Surrender Charge to be shoved into these things, and of 80+ year olds being put in EIAs with 22-year Surrender Charges. I could go on.

Yep, but this particular guy also works as a consultant for his clients and the FIAs are one of his offerings he sells. He freely admits he makes most of his money from selling FIAs

5. Their best (and really only, in my opinion) place is for money that you KNOW you will ONLY use for LIFETIME INCOME only. And remember, most of these provide a stream of STATIC income, the income does not go up with inflation. Some have an inflation component, but then you will start with at least 20% lower income. There are no free rides.

He claims that they have an "only up, never down" adjustment to the fixed income annuities that they offer, and that it beats inflation normally.

6. I'm working on a case for a new client right now, here's how it looks:

56 year old guy, big Yankees fan (good gawd, but I'm working with him anyway, he was referred), $800,000 IRA portfolio, plans on working until Social Security FRA (Full Retirement Age) of 66. Not very comfortable with the stock market any more, especially with the stagnation over the last couple of years and all the weird politics. But he knows he has to grow.

So we're putting $400,000 into a mix of conservative stock Exchange Traded Funds (ETFs), $100,000 into my firm's proprietary individual stock portfolio, and $200,000 into a corporate bond "ladder" which should help us ride up with interest rates.

The final $100,000 is being put into an EIA that will pay him a 7% bonus on funds invested, and guarantee a 6% return for the 10 years. Sounds great, right? Okay, it CAN be, but he ALSO knows that the various Surrender charges and restrictions means he can ONLY take a lifetime income with that money. We can't withdraw it or move it around. I've drummed into his head to think of this as a PENSION account. Set in stone.

In my mind, the EIA is a bond account. So he'll be 62.5% in stocks and 37.5% in bonds for a while, with an average bond return of around 5%. Pretty good.

That's just a brief overview.

Sounds great. My wife and I are playing with only about half that much, but we are looking to split half of our savings into three baskets; precious metals, slow growth income supplement and a fast growth investment to grow the savings as much as plausible without extreme risks, probably something like a fast growth mutual fund of some sort.

But now I am considering using an FIA for the last two investments, for a "reasonable but secure" growth fund.

Let me know if you have any questions, I'm happy to help. And I'm gonna charge Toro for a fucking hour of my fucking time for this, dammit.


.

Yeah, let us know how that turns out, lol.

 

[Mac1958]

Mac, thank you very much for the reply.

1. As for "who insures the insurers", that's a good question. Most (but not all) states have something in place to protect consumers up to a point in the event of an insurance company failure. Colorado, for example, has the Colorado Insurance Guaranty Association, which protects consumers up to $300,000.

Yes, I think Virginia also has oen for that same amount.

2. These things CAN be fine IF used PROPERLY and IN THEIR PLACE. You need to keep in mind that EVERY guarantee comes at the price of your flexibility. These things have "Surrender Charges", for example. That means, for the first 7 to 12 years, if you cash out, or if you take out more than allowed, you pay a penalty of up to, hell, 15%. But a lot of "salesmen" somehow "forget" to tell people that. This can only be for money that can be LEFT THERE.

Yes, we just want an additional income stream that can stay even with inflation or better.

3.

I very, very, very much doubt there is an EIA with no caps. It would be the first in the history of EIAs.

My bad, I misunderstood the guy in his presentation. They have a high cap, but they do have one.

4.

These things have a bad reputation, and in many cases it is deserved, here's why: They require NO securities license to sell, only a life insurance license, so what do you think those guys are gonna do? They're gonna do whatever it takes to cram as much of your money into one of these things as they can. And while actual advisors like myself are paid commission streams of 1%, they usually take the one time commish of 7% to 9%. Yep. Hit & Run. I could tell you some nasty stories of people being suckered into paying a 7% Surrender Charge to be shoved into these things, and of 80+ year olds being put in EIAs with 22-year Surrender Charges. I could go on.

Yep, but this particular guy also works as a consultant for his clients and the FIAs are one of his offerings he sells. He freely admits he makes most of his money from selling FIAs

5.

Their best (and really only, in my opinion) place is for money that you KNOW you will ONLY use for LIFETIME INCOME only. And remember, most of these provide a stream of STATIC income, the income does not go up with inflation. Some have an inflation component, but then you will start with at least 20% lower income. There are no free rides.

He claims that they have an "only up, never down" adjustment to the fixed income annuities that they offer, and that it beats inflation normally.

6. I'm working on a case for a new client right now, here's how it looks:

56 year old guy, big Yankees fan (good gawd, but I'm working with him anyway, he was referred), $800,000 IRA portfolio, plans on working until Social Security FRA (Full Retirement Age) of 66. Not very comfortable with the stock market any more, especially with the stagnation over the last couple of years and all the weird politics. But he knows he has to grow.

So we're putting $400,000 into a mix of conservative stock Exchange Traded Funds (ETFs), $100,000 into my firm's proprietary individual stock portfolio, and $200,000 into a corporate bond "ladder" which should help us ride up with interest rates.

The final $100,000 is being put into an EIA that will pay him a 7% bonus on funds invested, and guarantee a 6% return for the 10 years. Sounds great, right? Okay, it CAN be, but he ALSO knows that the various Surrender charges and restrictions means he can ONLY take a lifetime income with that money. We can't withdraw it or move it around. I've drummed into his head to think of this as a PENSION account. Set in stone.

In my mind, the EIA is a bond account. So he'll be 62.5% in stocks and 37.5% in bonds for a while, with an average bond return of around 5%. Pretty good.

That's just a brief overview.

Sounds great. My wife and I are playing with only about half that much, but we are looking to split half of our savings into three baskets; precious metals, slow growth income supplement and a fast growth investment to grow the savings as much as plausible without extreme risks, probably something like a fast growth mutual fund of some sort.

But now I am considering using an FIA for the last two investments, for a "reasonable but secure" growth fund.

Let me know if you have any questions, I'm happy to help. And I'm gonna charge Toro for a fucking hour of my fucking time for this, dammit.


.

Yeah, let us know how that turns out, lol.

Yeah, as long as you're going into with eyes open and with all the facts on the restrictions, they can be a good deal.
.

 

[Weatherman2020]

I have been thinking about them and I wonder who insures the insurers, but a person I know says he can sell me these things without a CAP, no penalties, no fees and a guaranteed growth of 2%.

Sounds too good to be true, but I though I would ask folks here to see what you all have to say.

A Beginner's Tutorial for Fixed Index Annuities — ImmediateAnnuities.com

Complete List of 200+ Index Annuities — ImmediateAnnuities.com

Fixed Index Annuity - Explanation of Fixed Index Annuities

https://www.myirionline.org/docs/de...exed-annuity-distribution-trends.pdf?sfvrsn=0

It's pretty complicated with taxes and so forth along with your personal portfolio. Talk to a financial advisor. I use Charles Schwab.

 

[JimBowie1958]

It's pretty complicated with taxes and so forth along with your personal portfolio. Talk to a financial advisor. I use Charles Schwab.

Mr Schwab is a very busy man, I hear.

 

[Weatherman2020]

It's pretty complicated with taxes and so forth along with your personal portfolio. Talk to a financial advisor. I use Charles Schwab.

Mr Schwab is a very busy man, I hear.

Think of him as Santa Claus before Christmas. Lots of clones.

 

[Mac1958]

My guess is that Schwab would be pretty anti-FIA.

 

[Weatherman2020]

My guess is that Schwab would be pretty anti-FIA.

I have some. Depends on your advisor I guess.