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the GWMB is a fee the advisor should've disclosed.
It stands for Guaranteed Minimum Withdrawal Benefit, It's not really interest income, but it just allows you pull your own money for life which sounds good but isn't often worth the fee, usually this makes you have a guarantee of around 2-4% depending on hold long you live.
if you put money in your mattress you can pull 5% of your own account for 20 years, so often times it takes 20 years to get a real return from those riders.
the GWMB is a fee the advisor should've disclosed.
It stands for Guaranteed Minimum Withdrawal Benefit, It's not really interest income, but it just allows you pull your own money for life which sounds good but isn't often worth the fee, usually this makes you have a guarantee of around 2-4% depending on hold long you live.
if you put money in your mattress you can pull 5% of your own account for 20 years, so often times it takes 20 years to get a real return from those riders.
Yep, it takes about 17 years today to see a penny of return from an spia ,and these plans tend to not pay out as much as an spia ..so it is about 20 years to see one penny other than the money you gave them
GMWB riders can be a very effective part of a comprehensive financial plan if used properly (longevity annuity) otherwise they are a waste of money.
They can be effective but way to costly for what they provide in most cases ...buying a spia when the time comes can be a much better deal .
People don’t know how to evaluate them ....anything you buy that is deferred has an opportunity cost .
If you bought a deferred annuity 10 years ago and started your income today , vs keeping that money invested the last 10 years and buying an spia ,that invested money will be far greater a sum then the money you put in the deferred annuity .so that invested money will Be a greater amount today and buy far more of an spia payment
They can be effective but way to costly for what they provide in most cases ...buying a spia when the time comes can be a much better deal .
People don’t know how to evaluate them ....anything you buy that is deferred has an opportunity cost .
If you bought a deferred annuity 10 years ago and started your income today , vs keeping that money invested the last 10 years and buying an spia ,that invested money will be far greater a sum then the money you put in the deferred annuity .so that invested money will Be a greater amount today and buy far more of an spia payment
The errors in your evaluation are that 1)the money invested during the accumulation phase prior to purchasing a spia is not accumulating at a guaranteed rate and 2)you have no idea where interest rates will be when you purchase the spia. In fact, if you were to purchase a spia today you would receive a historically low payout ratio. You'll probably cite historical performance to support your position during accumulation, however, past performance is not a guarantee of future returns My GMWB has an 8% compounded annual rollup guaranteed for life and no matter what age I elect to convert the GMWB value to lifetime income the payout will be more than any spia would provide unless interest rates skyrocket. Bottom line is there is a place for a longevity annuity with exceptional guarantees in most financial planning.
The errors in your evaluation are that 1)the money invested during the accumulation phase prior to purchasing a spia is not accumulating at a guaranteed rate and 2)you have no idea where interest rates will be when you purchase the spia. In fact, if you were to purchase a spia today you would receive a historically low payout ratio. You'll probably cite historical performance to support your position during accumulation, however, past performance is not a guarantee of future returns My GMWB has an 8% compounded annual rollup guaranteed for life and no matter what age I elect to convert the GMWB value to lifetime income the payout will be more than any spia would provide unless interest rates skyrocket. Bottom line is there is a place for a longevity annuity with exceptional guarantees in most financial planning.
i calculated that in ...figure the 4-5% growth most plans give you , you are likely way behind in what you could have bought later on in an spia after investing .
without seeing your plan and the fine print we can't discuss your plan ....
i can discuss a plan that is a deferred annuity and has a guaranteed growth rate of 5.50% up until you annuitize . i will post it for those who want to see how a typical deferred annuity works with a guaranteed minimum growth rate
i calculated that in ...figure the 4-5% growth most plans give you , you are likely way behind in what you could have bought later on in an spia after investing .
The proper use of this rider is to replace a likely result with a guaranteed result. Like I said previously, I'll take my 8% compounded anuual return guaranteed for life (not the 4-5% you used) over any other likely investment performance for a portion of my portfolio, then turn that accumulated value into a lifetime income at a rate which, at any age, is above historical spia rates.
The proper use of this rider is to replace a likely result with a guaranteed result. Like I said previously, I'll take my 8% compounded anuual return guaranteed for life (not the 4-5% you used) over any other likely investment performance for a portion of my portfolio, then turn that accumulated value into a lifetime income at a rate which, at any age, is above historical spia rates.
without seeing your exact plan i can't even accept the fact you are interpreting your deal correctly. i never ever take for face value what someone tells me they believe they are getting ....
you can clearly see in this example one is getting 5.50% guaranteed BUT ... because they control how much of the growth you actually can tap you see even at age 85 you have never seen 5.50% ... all you really got is 3.97% despite the guaranteed growth . so without seeing your plan i can not accept the numbers as the real deal, i am not confident you even understand the bottom line with out seeing the plan.
Last edited by mathjak107; 05-23-2020 at 04:59 AM..
this is the prudential deferred annuity ...... it has a 5.50% guaranteed growth rate .
if you put 100k in you can see if you defer 10 years to age 65 the 100k grows to 189k ....
you get 5% of the 189k as a draw which is 9,010 a year .
it takes from age 55 to age 76 to just get your 100k back you gave them .
lets drop that same 100k in an index fund the last 10 years .
it grew to 312,180 .
throwing the 312,180 in an spia at age 65 gets you 1542 a month or 18,504 a year .....
no contest
Its actually laughable that you totally ignore the points I make in my discussion so you can continue to represent yourself as being right.
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My GMWB has an 8% compounded annual rollup guaranteed for life and no matter what age I elect to convert the GMWB value to lifetime income the payout will be more than any spia would provide unless interest rates skyrocket. Bottom line is there is a place for a longevity annuity with exceptional guarantees in most financial planning.
