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That not a return ,its more than likely a withdrawl rate and even that sounds high. Ill bet that type comes full of commssions an fees too
Quote:
Originally Posted by Pilgrim21784
I totally agree with Mathjak107, a 9% return is not within the realm of possibility in the current interest rate environment. Several additional points:
1) AARP is simply a sales conduit to any of a number of annuity providers (none of which I'm very fond of as opposed to dealing directly with a sound annuity provider). AARP does not actually offer annuities. You're just paying additional sales costs to AARP for a product readily available without going through them.
2) It is highly questionable that a new annuity for a 85 year old person makes any sense unless one expects the individual to live quite a few years longer than mortality tables predict.
To be blunt, its rather unlikely that one would live long enough post-85 to benefit from a new annuity. The upfront sales costs and other fees at inception make it (IMO), a very questionable option, at best. I simply can't imagine any rational scenario wherein it would make sense to do so.
3) The low return situation is frustrating to everyone but safe "cash parking" beats the "Hades" out of paying serious sales and other charges for a product unlikely to provide any real benefit for an 85 year old. An 85 year old male has already "won the mortality game", investment risk at that age is simply not a good idea if the funds are intended for use in his lifetime. JMHO
Quote:
Originally Posted by Ariadne22
Oh, man. Of course they will pay 9% on an annuity for an 85 y/o man. They are banking he'll be gone in less than 7 years and they keep the money. Even if he buys a survivor payment, they won't pay out more than the cost of the annuity. So, he's just amortized the money he already has through an insurance company and has let them make money on his money. At this age, he may as well just start paying himself that money.
Thank you Mathjak, Pilgrim and Ariadne! I was able to locate the ad that piqued my Dad's interest in the January/February issue of the AARP Bulletin. Interesting...in the Bulletin, the Annual Payout Rate for an 85 year old investing $100,000 is 9.5% (effective 11/7/11). However, their online ad lists a rate of 7.9% (effective 1/23/12).
For those of you who think gold or silver a bad long term investment, you might have noticed that it jumped $40 today because, surprise surprise, interest rates not going up and that means more money printing. It doesn't pay interest or dividends, but they were trading gold and silver in the Bible. It will always have value.
I am hardly an expert on anuities, but for me personally, I wouldn't even consider them, because you are dealing with insurance companies, and IMHO, they are risky investments. I've met a lot of creepy people, who looked real presentable, but they were really creeps, who worked for insurance companies. Plus remember AIG. I know people that lost half their retirement in that company. I deal with insurance companies no more than I have to. I had an 403b, investment account with another insurance company that. They had a small stash of my money for 14 years and it NEVER increased in value. There is no FDIC insurance in that like a bank deposit. So my rule is, stay away for insurance companies for investments. Believe me, they have it figured so they are the ones who are guaranteed to make money.
This may not sound like an 'investment', but, at 85, with $50K and needing income ... what is the point of an investment, when one needs income?? Why not just put the $50K someplace safe and then withdraw $5K per year (10%)... or whatever percentage he wants to make. That way, he will retain control of the balance, not encounter any fees or risk ... and, in fact, make 1-2% interest.
Granted, if he lives beyond 95, he will/may outlive his money (or at least the $50K), but, at 85, the income-now, vs outlive-risk seems worth taking. Hey! -- if the rates of return on investments go up considerably in the next few years, he can always invest the balance.
while saying so he might outlive his money at 95 is easy to say ,for his familyhe can be a big financial burdeon. he can live another 5 years if he is lucky ,so you dont want any plan that fails if you live a few years longer.
while saying so he might outlive his money at 95 is easy to say ,for his familyhe can be a big financial burdeon. he can live another 5 years if he is lucky ,so you dont want any plan that fails if you live a few years longer.
If the objective is "residual inheritance" and not "income", as stated, you are probably right. Also, we were not told what comprised the immediate need for added income, it could be a fixed expense shortfall that must otherwise be made up by family.
Nevertheless, in today's economy, at age 85, if one's objective is to maximize their income with nominal risk, I believe that looking beyond a traditional investment vehicle -- makes sense.
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?
What is the ratio of your expenses to fixed income?
Oh, man. Of course they will pay 9% on an annuity for an 85 y/o man. They are banking he'll be gone in less than 7 years and they keep the money. Even if he buys a survivor payment, they won't pay out more than the cost of the annuity. So, he's just amortized the money he already has through an insurance company and has let them make money on his money. At this age, he may as well just start paying himself that money.
The question is can you annuitize the money yourself and get a better return? Probably not since you get a mortality benefit with an annuity and insure against outliving your assets.
This may not sound like an 'investment', but, at 85, with $50K and needing income ... what is the point of an investment, when one needs income?? Why not just put the $50K someplace safe and then withdraw $5K per year (10%)... or whatever percentage he wants to make. That way, he will retain control of the balance, not encounter any fees or risk ... and, in fact, make 1-2% interest.
Granted, if he lives beyond 95, he will/may outlive his money (or at least the $50K), but, at 85, the income-now, vs outlive-risk seems worth taking. Hey! -- if the rates of return on investments go up considerably in the next few years, he can always invest the balance.
After doing some more research online, the above strategy is exactly what came to my mind. My parents do have other funds invested with a financial advisor/group. Not sure how much, but I believe the money my Dad was thinking of using toward the AARP/New York Life annuity is in a CD at a local bank (FDIC insured). I believe he mistakenly thought the 9.5% mentioned in the ad was an interest rate, when it was actually a payout rate. (Thanks, Mathjak, for pointing that out to me.)
Lots of discussion on this and other related senior financial topics as a result of the Fed announcement to keep rates low through 2014. The financial networks and newspapers have some good discussions with some interesting points being made.
This may not sound like an 'investment', but, at 85, with $50K and needing income ... what is the point of an investment, when one needs income?? Why not just put the $50K someplace safe and then withdraw $5K per year (10%)... or whatever percentage he wants to make. That way, he will retain control of the balance, not encounter any fees or risk ... and, in fact, make 1-2% interest.
Granted, if he lives beyond 95, he will/may outlive his money (or at least the $50K), but, at 85, the income-now, vs outlive-risk seems worth taking. Hey! -- if the rates of return on investments go up considerably in the next few years, he can always invest the balance.
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.
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