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Old 07-08-2014, 10:17 AM
 
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If you are interested in Annuities i would look into the AXA Accumulator.
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Old 07-09-2014, 08:30 AM
 
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I spoke with a guy a few years ago who as a result of the financial meltdown had gone from mortgage broker to sub shop owner. He told me about his dad who was broke also and unable to retire and had reached the age he thought he would be able to. His problem he made a few bad as in really bad investments that tanked and took his financial nest egg down the tubes. His job? His career? Accountant!
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Old 07-10-2014, 01:24 AM
 
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Quote:
Originally Posted by RandomRetirementAdviceGuy View Post
When was the last time you have seen an insurance company go out of business? And now ask yourself when was the last time you have seen a bank go out of business?

Secondly everything is backed up by insurance companies, including the insurance companies themselves.

Next point is that annuities actually have lower fees than managed money, especially as the accounts grow. Annuities have a flat fee that starts high it seems at first but doesnt increase and with actively managed money as the account grows the fees become higher. Managed money also pays out A LOT more in commission compared to annuities so do not know how your are getting this information.

Now depending on the annuity you can go indexed or variable in my own opinion and assuming we aren't going for an immediate anuity, but a deferred one where you can let your money grow for a few more years. Either one, indexed or variable, will first will typically give you a signing bonus roughly on average 5%, which means if you put $1 million into an annuity, the company just gave you $50k instantly. Indexed will be on the much safer side where you will get a very high guaranteed rate of return typically 6% with potential of greater gains. I would recommend indexed more so if you want to potentially pass on a lot of wealth to your loved ones. Then variable annuities, will still give you a guarantee again of 6%, but on the retirement account value, but not the actual value. Quick example, $100k in annuity starting, market goes down 10% end of the year, cash value would be $90k, but the retirement value is currently $106k, next year market soars at 20%, cash value is now $100k and retirement value is now $127k. Now to speed things up to make a quick point, market goes up now something crazy like 50%, cash value is now $150k and the retirement value is now also $150k. So variable annuities are great if you want a lot of income throughout your retirement and will potentially not pass on as much wealth depending on cash value when you pass on. Both annuities will also pass the cash values of the policies tax-free to beneficiaries typically in most states. One last thing is they also typically give you a yearly income averaging about 5% of your total retirement value, but this will deplete your cash value as you draw money from them of course. So if you have $1 million, they pay you $50k a year for life, so after 20 years your value will run out, but wait, even if it is at $0 you will still receive $50k until you pass away.

*Disclaimer*Values used in examples are not guaranteed to happen but are ways to show you how your money can grow and work for you*
i am not sure what you mean by lower fees than managed money?



i have yet to see a variable annuity that does not have the expenses increase with the balance ,in fact they are all expensive even fidelity's which eliminates the death benefit others include so they appear cheaper. .

i had analyed one pitched to me that sounded great..

it started out with them promising me a minimum of 10% a year return for 10 years if the annuity was on myself or 5% a year min if it extended to marilyn too.. if my variable investments were worth less they would increase me to either 5% or 10% min depending which i took. . if i died my wife gets to continue the plan and she gets the 5% minimum option.

thats where it got interesting. ESPECIALLY THOSE GUARANTEES .

i asked if i could take that money out and of course no you cant.

that 10% a year guarantee are only bonus bucks good towards an annuity conversion into a lifetime income stream..

however heres the catch. you pay expenses on your average yearly account value. those bonus bucks after 10 years have your expenses running double because they are based on that phantom value.

if you started with 100k had 3600.00 a year in expenses before the fund expenses those bonus bucks after 10 years have you paying 7200.00 a year plus fund expenses .

there were options everywhere to add to the plan each one increasing costs as well.

as best as i could tell here are the expenses.

the expenses below are based on the total account value with the phantom bucks being included they give you.

mortality and expense risk charge 1.10%...

administrative fee .20%

combination enhanced death benefit .45%

beneficiary protector .35%

10% lifetime income option charge 1.2%

10% spousal continuation charge .30%

total 3.60% but we havent included the fund expense fees so tack on another .45 to 1.94% depending what funds you picked.. all that can run almost 6% on an investment that typicall may return 9% long term.


is that less than managed money?

keep in mind annuities are taxed at regular tax rates too on all gains, that can be a far cry from the 0 to 20% you may pay on your taxable account .

Last edited by mathjak107; 07-10-2014 at 02:51 AM..
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Old 07-10-2014, 03:24 AM
 
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deferred fixed annuities used as longevity insurance and immediate annuities will pack the biggest punch for the cost and can be great products for improving on success rates. moshe milevsky, dr wade pfau and michael kitces have put a lot of research in to this area.

but most annuities with a twist end up being to good to be true and relatively expensive products that can be done using far simpler less costly products. most variable annuities are expense traps . index linked may be a better way to go but i have not evaluated any yet so the jury is still out as far as any comments i have .

while fidelity and vanguard offer lower cost annuity products the variable ones are still not there.

a simple immediate annuity even at these low rates pays out over 6% at very little cost.

typical fees for fidelity on a variable portfolio of 60% stocks and 40% bonds look like this . The annuity imposes a fee of 1.9% for a single-life annuity or 2.05% for joint life, plus investing fees averaging 0.70%-1%. there surrender chargeis 2% up to five years . but there is no death benefit on most of these. to add life insurance acting as a death benefit would add 1/2-3/4% more.

expenses still will fall between 3-4% when all is figured. figuring an 8% return for a 60/40 mix the result is quite low compared to a simple immediate annuity.

Last edited by mathjak107; 07-10-2014 at 04:19 AM..
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Old 07-10-2014, 05:44 AM
 
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This is a good start to help you find a financial advisor.

How to find the right financial adviser
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Old 07-10-2014, 05:51 AM
 
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Is this the appropriate time to issue a salesman alert warning?
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Old 07-10-2014, 09:37 AM
 
Location: SoCal desert
8,093 posts, read 13,232,688 times
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Quote:
Originally Posted by mathjak107 View Post
i have yet to see a variable annuity that does not have the expenses increase with the balance ,in fact they are all expensive even fidelity's which eliminates the death benefit others include so they appear cheaper. .
Mine has not. The expenses are the same dollar figure per quarter as it was in 2005. The guaranteed amount has doubled since 2005. And I'm getting a small 'persistancy credit' now, which is close to halving the expenses.
Quote:
Originally Posted by mathjak107 View Post
if you started with 100k had 3600.00 a year in expenses before the fund expenses those bonus bucks after 10 years have you paying 7200.00 a year plus fund expenses .
Opened smaller account at 60K, expenses $737 a year.
And the expenses are still $737 a year at $120K.

So I guess your example is the worst case scenario, and I got one of the good ones.
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Old 07-10-2014, 10:31 AM
 
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it is a variable annuity and your expenses are not based on your account balance? I would have to see that for myself

the expenses are usually based as a percentage on the balance. you have fund fees that have to be going up with the balance alone.

the fee percentage stays the same but these things are multiplied against the balance like any fund fees or expenses.

somehow I do not think it is a variable annuity or you are looking at only 1 expense.

that would be less than 1% , no way is that total cost on a variable annuity.

what annuity is it?

Last edited by mathjak107; 07-10-2014 at 10:54 AM.. Reason: w
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Old 07-10-2014, 12:34 PM
 
Location: SoCal desert
8,093 posts, read 13,232,688 times
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Quote:
Originally Posted by mathjak107 View Post
it is a variable annuity and your expenses are not based on your account balance? I would have to see that for myself
the expenses are usually based as a percentage on the balance. you have fund fees that have to be going up with the balance alone.
the fee percentage stays the same but these things are multiplied against the balance like any fund fees or expenses.
somehow I do not think it is a variable annuity or you are looking at only 1 expense.
that would be less than 1% , no way is that total cost on a variable annuity.
what annuity is it?
Well, I'll put up with what I'm comfortable putting on the web.
It's one of the "Lincoln ChoicePlus"
The specific contract/rider is no longer available, it's almost 10 years old.

Oh, and I was wrong on the figure - the $35 contract fee is a once a year thing, not quarterly.
These are the same dollar figures I was getting charged in 2005 @ $60K. Sorry, I don't have a PDF of that year to show you, but I do have it entered in Quicken that goes back 1996.
Heading For Retirement and Decisions to Make-capture.jpg
Some people do find deals, ya know.
Because of the way this thing has grown, I don't care what kind of commission she got, LOL
And needless to say, it's no where near the $3600 a year for $100K for fees.

Last edited by Gandalara; 07-10-2014 at 12:47 PM.. Reason: Last sentence.
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Old 07-10-2014, 01:07 PM
 
71,550 posts, read 71,730,589 times
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there seems to be a whole of of other stuff missing like your options and fund expenses.

I see nothing really listed on that slip.

you do not show the underlying fund expenses. you would be hard pressed to find a variable annuity that clocks in at less then 3% of your balance each year except vanguard. and depending on death benefit options it can be over 3%


here is the Lincoln choice plus variable annuity. go to expense section.


http://www.lfg.com/lfg/DOCS/lif/CP_A...ce_B_Share.pdf

Last edited by mathjak107; 07-10-2014 at 01:54 PM..
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