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annuity sales people love to talk about the withdrawl rate and make it sound like an interest rate...its not the same thing..
a withdrawl rate includes your own money, maybe even all your own money..your principal is actually returned...
think about even an immeadiate annuity's actual return...
you give them 100,000 and at a 6% withdrawl rate for the first 12 years or so they are giving you back your own money... the actual interest is zero....
year 13 you are now starting to collect on their dime but they are paying you with the interest they got all those years on your money... year 13 your actual return is less than a fraction of 1% for the last 13 years..
it will take you living decades on their dime before you see a return even close to 6%....
there are still uses for immeadiate annuties but its not about return, its about buying a pension and having a lifetime of income guaranteed...even if its your own money coming back for most of that time..... the annuity guarantees once you use up all your money they will keep paying you no matterhow long you live.... its a good thing if you live but a bad thing if you die.
its life insurance in reverse... with life insurance the insurance company is betting you will live ... with immeadiate annuities they are betting now that you are older that you will die
I used to work for a firm which sold annuities, etc. - the investment counselors (ie salesmen) would tend to lead their clients in the direction of the company/product which was offering the largest commission or a free trip for so many sales.
I want to revive this thread from 10 years and 2 weeks ago, because I think I have something important (at least important to me) to say on the subject, regarding specifically Swiss annuities.
First, annuities overall. They are actually a staple of my retirement. I am not knowledgeable about investing, and mentally have an extremely poor tolerance for seeing any losses, so I figured out early that market risk is not for me. Over the years, I have purchased a number of annuities from several US companies. All of these annuities are fixed, some of them immediate, some of them delayed. As opposed to Mathjak's opinion, I have been quite happy with my immediate annuities, but even happier with delayed ones. I think the modest returns are quite good for a financial vehicle that is reasonably guaranteed, ie, not at market risk - as long as the annuity is FIXED - ie, you know up front exactly what X monthly payments you'll receive if you pay the Y premium to the insurance company. I got the majority of my US annuities through the annuity broker immediateannuities.com, and as I said, I have been highly satisfied with these products.
Now, Swiss annuities. I have previously voiced positive opinions on this forum about Swiss annuities, which I have to severely retract now. They are still marketed to US citizens, particularly those who may have assets at risk (such as physicians, who are always at risk of malpractice lawsuits) as a means of asset protection, since Swiss funds cannot be legally seized. But, I have to unfortunately say that I have learned the hard way that Swiss financial companies use deceptive practices to get your money, and give you essentially no money growth in return. They use flashy non-standard terms like "flexible annuities" to sell you a variable annuity when you think that you purchased a fixed annuity ("small print" is extremely well hidden). Annual statements of value of the account are extremely deceptive, listing the "value" of your account - without disclosure that this value of the account is the "value" before the enormous fees, and the real value of your account is in fact not much higher than the premium. Whatever you do for your retirement, just don't have any dealings with Swiss insurance companies. It is true that they are very safe in the sense that they historically never fail - but it appears that they never fail because they have such slick methods for taking your premium and give you practically no growth on the premium money. For my deferred Swiss annuity (deferred for 20 years) the real annual growth will end up being about 0.9% per year, where I would have gotten about 4% annual growth on a fixed annuity deferred for 15 years from a US insurance company. I only discovered this 15 years after I obtained the Swiss annuity, because the Swiss company changed the format of the annual account statement. In the previous years, the statements stated "the value of the account as of Dec 31, 20xx"; last year's statement broke down this value into "surrender value" and "surplus". I inquired about these terms, and eventually uncovered the truth - that the "value" of my account as reported to me by the Swiss company is not anywhere near the actual amount that I could ever receive with any form of annuitization of the account.
So, if anyone wants my advice, I have been very happy with FIXED annuities (both immediate and deferred, but I personally have been happiest with long-deferred ones) from various US insurance companies, obtained through immediateannuities.com. Just do not get a VARIABLE annuity, ever, and make sure that a variable annuity is not sold to you under some different sneaky name (this annuity broker that I mentioned is super honest and straight-forward - they will explain everything very thoroughly, and take multiple written precautions to ascertain that you are thoroughly aware what you are purchasing).
I have been shocked by incredibly crafty deception perpetrated by a Swiss company selling annuities, which company I am unable to name here, because I have been told that lawyers of Swiss insurance companies routinely shut down public forums and legally pursue a client if someone posts a negative comment about a specific company on a public forum like this one.
Last thing I would ever do is buy an annuity product outside of this country ...they are complex enough when constructed here .... I never recommend anything other then a low cost spia from a top insurer here
Why was an annuity recommended? Are you in your late 70's and fear running out of money? Could be a good reason for an immediate annuity. Be careful of fees and get a few quotes. You can get these on line.
My husband and I bought a deferred annuity to start paying out when I turn 70. We bought it as a form of a "pension" that will provide us with a stable income flow to cover basic living costs and to supplement our social security. Since we only allocated about 15% of our portfolio for the annuity, we will still have plenty of investments that will provide an additional cushion. The annuity was to provide peace of mind that we would always have a base income.
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