"Even Math Teachers Are at a Loss to Understand Annuities" (investments, stocks)
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already it is skewed and flawed as soon as you click the link . it is not objective at all . it does not even talk about the most worthwhile products like spia's or mygas . it fails to address the benefit's of combining spia products and your own investing .
in short skewed , one sided and a waste of time reading it since it is missing the most recommended group of products by not salesman but by those academics who study retirement planning theory and the benefits of integrated strategy's today .
heck , i can come up with a similar list that is anti equity investing or bond investing ..
When you invest in a stock it's fairly clear what you are getting, make your case.
Neither equities or bonds guarantee a return for life.
annuity's are income insurance . they work well at zero return in an integrated strategy . all you need is a rate of cash flow from the annuity that is higher than you can safely pull from the cash and bonds portion of your own portfolio for them to do a better job than bonds .
no , i don't recommend using annuity's by themselves . but they can be a better choice than bonds in a diversified portfolio
the reason SPIAs prolong the life of the remaining financial portfolio is due to the reduction in the initial withdrawal rate in the early and critical years
Last edited by mathjak107; 10-30-2016 at 02:45 AM..
I do not understand what math has to do with an annuity, beyond getting a percentage a year of what you put in that would be more than a person could get in a CD etc.
To me immediate annuities are sort of like a pension but for the most part with no cost of living increases, unless a person is willing to take much less a month. Insurance companies win most of the time on any annuity they sell.
I am 68 and my wife is 48 so an annuity for us was all about making sure she will have a guaranteed lifetime stream of income as part of our portfolio, the other part will hopefully grow but with the crazy times, it could go bust too, thus it sure is nice having that check come in each month and knowing it will be there even when the wife is very old.
immediate annuity's are not the problem child , they are cheap and simple . typically they are not what commissioned sales people will offer you .
it is these deferred variable annuity's with guaranteed minimum returns that are so complex that they can be very difficult to figure out .
mostly because you will never see a spread sheet from an insurer with the real deal laid out in front of you . their spread sheets are more hypothetical outcomes based soley on conditions you likely will not see .
i have posted and broken down examples here in the past . while i do like spia's combined with your own investing i am not so thrilled with other types .
annuity's are income insurance . they work well at zero return in an integrated strategy . all you need is a rate of cash flow from the annuity that is higher than you can safely pull from the cash and bonds portion of your own portfolio for them to do a better job than bonds .
no , i don't recommend using annuity's by themselves . but they can be a better choice than bonds in a diversified portfolio
the reason SPIAs prolong the life of the remaining financial portfolio is due to the reduction in the initial withdrawal rate in the early and critical years
I read some of these annuity articles that are about non-spia annuity and they make no sense to me.
We have a SPIA--it is super easy to understand and easy to implement.
While it doesn't "earn" anything, the income stream is comforting. We willingly gave up the growth on this modest amount(75K) knowing that our pension and SS have a COLA.
I think the payback is something like 5.35%, gonna take years before a savings account does that again.
break even on an spia today is about 16 years . spia's for a single are in the 6% range but that is really irrelevant in the scheme of cash flow . it is like worrying about break even on a contributory pension .
what you are buying is an income stream that is not dependent on your investments and provides a higher rate of early cash flow then you can safely take from yourself . .
some of the deferred annuity's with guarantees are not bad products . used as proxy's for what you would be getting on idle cash on your own the cash flow can be very good .
the problem is when these products are offered as proxy's for other kinds of investments . the way they are structured almost guarantees you will not likely do better than the guarantees over the long term .
if anyone wants me to i can illustrate why
Last edited by mathjak107; 10-30-2016 at 07:58 AM..
the problem is that folks usually think they do understand . they hear guaranteed 5 or 10% minimum returns regardless of what the investments do . they see spread sheets illustrating this . unfortunately we only know what we know and frequently don't know what we don't know about the things we don't know .
we were pitched a variable annuity by chase that sounded so good i would have done it if i didn't know how to look under the hood . it guaranteed us 10% for 10 years regardless of the investments the annuity was in .
it really did give you that but there is more to it than meets the eye . it takes a thorough understanding of the product and good skills with ex-cell to really sort out .
none of which has anything to do with being a math teacher . you got to love these skewed articles .
Last edited by mathjak107; 10-30-2016 at 09:32 AM..
If you dont understand what you are being sold JUST be aware you making a payment on the sellers PORSCHE....................lol.
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