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you are confused . if it was a cd she would be living off principal and interest and the account goes down unless the interest is more than she is taking out which would not be the case . .
Yup the burn rate of the CDs would more than likely lead to poverty
you are confused . if it was a cd she would be living off principal and interest and the account goes down unless the interest is more than she is taking out which would not be the case . .
lets dumb this down...
If I buy a $100,000 CD that pays 5% I receive $5000 per year in interest. When I am paid that 5% it DOES NOT get deducted from my principal. My principal stays in tact.
In the case of this annuity , you and low are claiming I'm getting 6.5 or 7% return. The problem with that is that when I start receiving those payments that amount gets deducted from my principal....that is not the case with a CD
If I buy a $100,000 CD that pays 5% I receive $5000 per year in interest. When I am paid that 5% it DOES NOT get deducted from my principal. My principal stays in tact.
Your account value would drop however. As interest accrues your account value rises, let's say to 105k before the interest paid. Once the interest is paid out to you does your account value stay at 105k? Nope it drops to 100k
Quote:
In the case of this annuity , you and low are claiming I'm getting 6.5 or 7% return. The problem with that is that when I start receiving those payments that amount gets deducted from my principal....that is not the case with a CD
Put together a spreadsheet, CDs earning 2% a year for 8 years, then start an 11,480.00 draw annually and see how long it last
her annuity has a guaranteed 6 or 7% growth rate on the virtual account used for annuitizing only .
that money is only good for basing a draw on .
the actual account has far less money it , that is the account she gets to take or heirs get .
the virtual account was 164k , the actual was 117k i think .
what kathy said is she gets the guaranteed 6% account if she liquidates . that is not correct and there was nothing snarky saying so
That's not what she said at all. She made two separate points, the first that there is a "6% return" (again, wrong word), and the second, that she can "take out fully with no penalties" which could mean either account value because she give no further details.
I don't sell anything. Defensive? Correcting your ill advised thoughts that are clouded with emotion with actual facts isn't defensive it's just correcting nonsense
Your account value would drop however. As interest accrues your account value rises, let's say to 105k before the interest paid. Once the interest is paid out to you does your account value stay at 105k? Nope it drops to 100k
the point is the principal stays in tact...its unaffected by the payments of interest...
I don't sell anything. Defensive? Correcting your ill advised thoughts that are clouded with emotion with actual facts isn't defensive it's just correcting nonsense
you said:
I've seen it before from children of clients who ultimately have this as an underlying motivator
buying an annuity like this is done in a certain way .
follow this : this is called a deferred annuity . it means you are buying the annuity as income for a point you choose off in the future .
typically you buy it before retirement and let it grow either via the guaranteed growth rate or via the actual account balance from the investments .
so you buy it at 55 and let things grow for 10 years .
at 65 you are ready for the income . you get the higher as a base of either what your investments did or what the guaranteed account did .
so in this case the actual account did not do well and has 117k in it . that is all your mom has in her account ..
but the guaranteed account did better it has 164k in it . only that account is never your moms to take .
it is only used to generate an income . remember you buy an an annuity for income .
so at this point she gets to base her income on the 164k since it is higher and they will do one better . unlike if she was taking money out of her own account to live they will not reduce the virtual account every year by what she takes .
wow , that is a sweet deal , no reduction as she spends down in income .
but the money is still subtracted out of her actual account because she did get the money . they are just giving her a bigger base to base her income on than her investments gave her and unlike you or i spending down to live they will not take that amount off the virtual account .
so the deal on these annuity's are basically this :
we will let you invest your money the way you always would on your own and then when you are ready we will send you a monthly check based on how your choices in investments did and just like on your own every payment you spend comes out of your account ..
but we will throw in one more feature . for about 2% a year we will set up a separate account that is not your money to keep . but we will guarantee you 6% a year growth rate if the markets and fees have your own investments doing poorly .
we will stop the 6% growth rate when you say send me my income and at that point we will base your income not on your lower value account but on this higher value account . we will also thrown in one more perk for those fees . we will not subtract the money you take off your balance in this virtual account like your own account has it subtracted . we will guarantee this income forever with never a reduction for spending it down .
but remember you only get your actual account value if you liquidate , not our special account .
Last edited by mathjak107; 09-12-2016 at 03:40 PM..
the point is the principal stays in tact...its unaffected by the payments of interest...
Not relevant when we are discussing account values and still ignores the point of the product
Quote:
Originally Posted by FREE866
you said:
I've seen it before from children of clients who ultimately have this as an underlying motivator
where have you "seen it" then?
what do you do for a living? or what did you do?
What I do for a living isn't relevant really. I don't sell insurance/annuities and never have. Btw did you put together a spreadsheet ?
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