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Thread: Annuities

  1. #16
    Join Date
    Jun 2006
    Location
    CT, USA, Earth
    Posts
    2,106

    Re: Annuities

    Quote Originally Posted by Jeffy25 View Post
    one of my first mentor's taught me that rule....

    It's so basic, so simple....and not enough people know it.
    agreed... its so simple that most people dont trust it I think lol.

    So... how bout u start a trust for ME jeffy
    The Constitution was designed by the founders to save people from themselves. It never fails to amaze me how good of a job they did
    haveacigar
    My Finest work!!!
    Death don't want ya... But the Lotus do... so bring ya wicked shlt we gonna bring ours too!!!
    ><((((> .`.><((((> .`.><((((>
    .`.><((((> .`.><((((>.`.><((((>.`.><((((>


  2. #17
    Join Date
    Sep 2008
    Location
    Cape Girardeau, MO (SEMO)
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    16,920

    Re: Annuities

    haha, it's been revoked

  3. #18
    Join Date
    Oct 2006
    Location
    Charlotte, NC
    Posts
    7,395

    Re: Annuities

    I got a mailer to go to a free dinner and discuss retirement options. I figured it was a product sales pitch, but it couldn't be as bad as the timeshare crap I put up with once, and the wife and I get a free meal at an upscale restaurant...why not? I'm hyper focused on my retirement for a 33-year-old...losing all that money in the last recession really got me scared. I mean social security will be gone, and now I have barely $100k towards retirement...only 30 years or so to make up that time. If I had kids or lost my job, holy heck I'd be in the crapper.

    So this presentation turns out to be for fixed indexed annuities. The guy paints a picture of a market about to fall again (S+P is higher than we've ever been! blargh) and says that his fixed annuities will avoid the falls that my stocks would because they can't do worse than 0% - they can't lose money. Of course they can't gain as much as the market, because they are capped on the positive side - but some of the positive and none of the negative, over time, he argues is a better deal. Plus a lot of them give you an immediate bonus of 6% or 15% to work with.

    Now I'm the only guy under 40 there, so I have 30-35 years to ride the market and see the massive upswings as well as the downfalls. I also have some control over my 3 401ks and two IRAs - I can move them to raw money market accounts, or juggle them around to avoid risk when a downturn starts. I work from home, I'm on a PC all day, and I have been reading Money magazine and Forbes the last few months to bone up on financial knowledge. I did some psuedo-stock picking in 2010 (back when Ohms was saying to buy buy buy) and if I had gone with my 6 picks, 5 of them would have more than doubled by now. Instead I paid for our wedding, dog cancer, and lots of vacations.

    Anyway - I am interested in this just because of the diversity. And because my traditional choices are few - my company doesn't match on the 401k, and with my income, 401k contributions don't make much of an impact. I can't even deduct my rental property's mortgage interest anymore...putting money in an IRA might not even affect my taxes.

    From reading up on fixed indexed annuities online, they were created to beat CD rates only - so if a CD is 2%, these were meant to be 3 or 4% - nothing like a 12% or 18% gain the stock market would give. It seems tailored to older folks at the end-stages of retirement that don't want the chance of losing any of their nest egg...not for goobers like me that need all the risk now. But the guy said that 401ks and all those charge a ton of fees and they just aren't disclosed...one of my IRa accounts is still at a net negative since I set it up in 2007, and one of my big 401ks is net negative so far this year too...so I'm wondering how bad those fees really are.

    If anyone has set up a fixed indexed annuity and has some feedback, please share it!

  4. #19
    Join Date
    Oct 2006
    Location
    Charlotte, NC
    Posts
    7,395

    Re: Annuities

    So I did some research, and generally don't like annuities - they are lower gain, for older folks looking for lifetime income. That's not me.

    BUT the one product that seemed worth a look was the Allianz 222 fixed indexed annuity. It has two funds with a spread (1.9%) instead of a cap. It has a $20,000 minimum, which is like 1/5th of my retirement savings (half of one 401k). There are also benefits - 15% bonus, 150% of market return, etc - but those would be more for if I am doing a lifetime benefit. The negatives are I have to keep it where it is for 10 years at least (til I am 43).

    So I'm still very skeptical, but hedging my more aggressive 401k and IRA practices with a bit of safety seems fine. If it performs well, I could move more money into it in the next 3 years, or simply double down in 10 years. If it does terribly, then I learned my lesson early and can walk away in 10 years with whatever gains it had, if any.

    I'm a little scared, but being 33 I have all kinds of time to make mistakes and recover, thank goodness.

  5. #20
    Join Date
    Oct 2006
    Location
    Charlotte, NC
    Posts
    7,395

    Re: Annuities

    It's been a year, so I wanted to weigh in on the Fixed Indexed Annuity experiment. Like I said, I had one old 401k, for around $21k, that I rolled into the Fixed Indexed Annuity. I was shown historic fund performances in the 8-11% range, I was told there was NO possibility of losing money, and I was swayed by a $5k bonus right away in protected value. OK, I thought - my wife had literally the same 401k from the same job, same broker (New York Life) and around the same amount. It was as perfect an experiment as I could arrange - after a year, we see how each did.

    New York Life had never done great, but last year it was at 22,920.17. This year it is at 24,768.63. A gain of 1,848.46 - 8% over the value a year ago. Pretty good! That works for a long-term retirement strategy - things are humming along fine. The market should return values around there, but really last year was a banner year in the bull market...8% is pretty sad, but oh well - it's a bunch of indexes, so meh.

    My fund, however, was $21,798.01 when I did the Allianz 222 Fixed Indexed Annuity. A year passed, I got my statement, and...$22,240.36. A gain of 2.03%. In a fantastic year for stocks, my fund put up money market returns. I could've done bonds and made that. I could've stayed in my old, dead 401k plan and gotten 4 times the return. And if I had controlled the stock and invested it myself, with no caps, no spreads, no fund fees at all, I could've made a killing.

    This experiment is very costly - this $22k is now segregated from my other funds, out of my control, and while I get a good handle on the self-directed IRA, and making great returns in the market, this stuff is stuck making what a savings account used to. It'll be 9 years before I can get my fingers on it and redirect it into the stock market - I'll be in my 40s, ugh. I wonder if I'll still visit here??

    On the bright side, this little frozen portion of my nest egg CANNOT lose value. It allows me to take more risks with the big chunk of my retirement that is under my control, since this bit can't lose value. I don't have much control over the chunk in my current employer's 401k either, so that's a decent counterweight as well. Since those exist, and make up about 30% of my retirement, the other 70% can go into high risk stocks and net some really big gains.

    So if you were considering a fixed indexed annuity, while the Allianz 222 was the best I found, it seems pretty crappy. As a retirement vehicle, unless you are close to the end of your working years, or need a "safe" place for a portion of your nest egg to offset risk, I would say pass it by and do real investments that offer a real return. If I had my ENTIRE savings in this puppy, I would never make it to my retirement number.

  6. #21
    Join Date
    Jun 2006
    Location
    CT, USA, Earth
    Posts
    2,106

    Re: Annuities

    Thanks for the update AOW. I don't frequent the forums much anymore but I happened to come back and see this. Good to know. I have never heard good things, but never heard bad things about them.
    The Constitution was designed by the founders to save people from themselves. It never fails to amaze me how good of a job they did
    haveacigar
    My Finest work!!!
    Death don't want ya... But the Lotus do... so bring ya wicked shlt we gonna bring ours too!!!
    ><((((> .`.><((((> .`.><((((>
    .`.><((((> .`.><((((>.`.><((((>.`.><((((>


  7. #22
    Join Date
    Oct 2006
    Location
    Charlotte, NC
    Posts
    7,395

    Re: Annuities

    If anyone is still interested, we can close the book on the Fixed Indexed Annuity as a potential retirement vehicle. I got my statement last week, and in 12 months, I gained exactly $0.00. Not a penny.

    To be fair, the S&P index put up -1.445% during the same span. So hey, I didn't lose any money. BUT if you include reinvested dividends, it's at least a positive, 0.317%. More importantly, if I had thrown my money into an index fund in May 2014 instead of this annuity, I would be up 10-14% total, instead of up a fraction of a percent. Your losses are gone, but your gains are so nerfed...you might as well just put it in bonds or CDs or something if you want safety and those low returns.

    During that same May 2015-May 2016 span, while actively managing my rolled-over IRAs, I took a starting balance of $65k up a sweet $10k to $75k - a cool 15% gain. And I was more like $78-79k (21% gain) for a while, this year has been entirely loss. Again I am an amateur, and at most times I have about half that money sitting uninvested as a safety net. There was some luck, but some research.

    I will be cashing out of my crappy Allianz 222 Annuity entirely - with the $1700 penalty, I will barely get $20k back out of my original $21,798 invested. Still, I bet I can turn that into $25k or $30k by the end of the year. My current job has a separate 401k that can be my 'safe' money while I invest this segment strategically to make some big bucks.

    The bottom line is, don't believe anyone that says they have a magic retirement vehicle for you. They care about making money off of you. Commissions for getting you into crap, penalties when you see the crap and bail out, upper limits on gains, spreads to cut into your gains, and then management fees for funds to eat into your gains. All little slices that make the 15% a year you should be making into more like 3% or 5% - enough so you think you are making progress, while fat cats laugh on their boats at your misplaced trust.

    No one cares about your retirement except you.

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