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My thoughts exactly. He is well past the investment time of life. Only an an insurance co. can stand to gain with an 85 year old. Perhaps he could cut back on other expenses, like if he still drives a car get rid of that.
I'm assuming the 85 year old you're talking about is my Dad, referenced by me in earlier posts.
I think my Dad was simply hoping to capitalize on an investment that he thought yielded 9%. As I've said before, my parents are VERY frugal, and I really think they're doing OK financially because of that frugality. However, their investments are not yielding much in the way of interest.
There's no way my Dad can give up his car right now. He and my Mom live in an area that is somewhat suburban. In order to get to public transportation (which does not run that often in their area), they'd have to walk the equivalent of several blocks. My Dad has bad knees and my Mom had a serious stroke several years ago, so walking to public transportation is not an option.
I thank everyone who has helped me to learn about annuties. I'll be calling my Dad this weekend to give him some more info about why it wouldn't be a good idea for him to invest in the one advertised by AARP/New York Life.
Just an added word of caution. As people age, they are much more susceptible to sales pitches and believing in the "pie in the sky" when it comes to their money. Consequently we have many, many very bad people preying on them to relieve them of their funds. I think it is a trust issue. Older people naturally believe what they read and what the nice man says.
So keep a close watch on your dad, and caution him about this from time to time. I had an elderly uncle who I had to dissuade on way to many occasions from falling for these pitches for "greater" returns. He would read all the junk mail he got and if it sounded good he would call them up and set up an appointment, and then I would find out and have to step in and stop him, and lecture him once again.
If I had known how old the person was, I would have responded differently than my post #2 in which I suggested a SPIA. I assumed a younger retiree was asking. Sorry! Next time I'll ask for more details before responding. ;-)
We have a MetLife Annuity through Fidelity Investments. After 5 yrs. you can cash it out. It also can be willed to heirs (which some can't). We get the same amount of $$'s every month, even if the market goes down and the value of the annuity with it. We are very happy so far. I trust Fidelity. Many annuities have a front load cost which is basically a commission for the sales agent. There is none with Fidelity.
shame on you ,someone didnt run their own numbers on this policy.
if you check your total annual annuity fees and fund expenses for those guarantees ,they are taking back about 3% a year from your return for an annuity that passes to a spouse .
couple that with a 4-6%minimum guaranteed payout depending on age when you draw your income and that just about assures if the markets achieved their long term average return ,at best you will always only get the minimum payment.
since your balance will by design always be worth less then you gave them after the payout and expenses ,you are pretty much locked into the minimum payments forever. a 100k put in the annuity, after 30 years at 8% will only have a balance of 84k left if markets even achieved 8% . since thats less than you started with your never going to earn more than the minimum. the fund managers would have to do better than the 8% historical return for that mix of stocks and bonds. thats more than likely not happening.
that means your guaranteed monthly income will become fixed forever regardless what the markets do because with little balance left you cant get more than their minimum guarantee.
not only is the average return important but the order of the gains and losses are important too. running the numbers though firecalc showed quite a few periods of zero balance left for heirs .
double check me but i believe the way fidelity comes in 1% or so less than others in fees is there is no guaranteed minimum death benefit that most others have built in. to equal that option you need a seperate life insurance policy.if you could check your policy and tell us if you still dont have a minimum guaranteed death benefit that would be great.
so whats it all mean? depending on your age you may get a withdrawl rate of 4-5% thats fixed for life and no principal left for heirs... you could have gotten the same return from a tax free muni and had all your principal left for heirs.
still sound like you got a good deal?
Last edited by mathjak107; 02-02-2012 at 04:15 AM..
so whats it all mean? depending on your age you may get a withdrawl rate of 4-5% thats fixed for life and no principal left for heirs... you could have gotten the same return from a tax free muni and had all your principal left for heirs.
still sound like you got a good deal?
Those of us without heirs ... it doesn't matter :-)
then just invest it wisely ,send whatever is left to me!.. i will be you your friend lol..... in fact ill gladly pay you the same 4% and keep your principal.
it gets me how folks do all this research on buying a car or refrigerator yet they learn nothing when it comes to their money...
folks,your never a client in the investment world, your a customer . you will be sold all kinds of things even by reputable companies . the burdeon is on you to evaluate these products and never get a thought in your head for a second that if its offered by fidelity,vanguard, or anyone else else that its a product that is a good deal or even for you until you go over the numbers.
the above example i used took less than 5 minutes to evaluate to see the real deal..... if on the best of days you may get 8% in the markets with a 50/50 or 60/40 typical mix and they are pulling around 3% in expenses you can see right away your never going to have more then you put in and never more then the minimum guarantee.
if you read the policy you will spot it has no minimum death benefit hense very little for your heirs to get of principal since odds will be your spending down the balance faster than your making it in gains..
Last edited by mathjak107; 02-03-2012 at 02:33 AM..
Say you're retired, you live on a fixed income, have no savings and no investments. But you sold some property and ended up with maybe $50,000. How would you invest it so that you could use it to supplement your monthly income?
Buy four unit apartment building in nice part of town and move in to unit, rent three.
I wouldn't trust municipal bonds today. Every bankruptcy lawyer I know is buzzing about one potential municipal bankruptcy or another. Once they start to file, it will be a like an avalanche. The bond rating companies do not have a clue about unfunded pension and health and welfare liability. they say they do, but my city can't scrape together 3 million dollars to keep some swimming pools open and has a 2 billion dollar unfunded pension liability. good bond ratings by morons who rate these things. And, the city just undertook a 100 million dollar streetcar that will require debt service and operating subsidy.
I sure would not want to stake my retirement on a municipal bond. At least not one from Cincinnati.
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