Annuities too expense or too complex to understand?

[LutherF]

I am doing my due diligence on annuities.  💰💸

I thought I was getting a comprehensive analysis of my retirement portfolio what I got instead was a sales pitch for an annuity.  In particular,  I am trying to canvas people who are happy with their annuities.  There must be a group (Facebook) discussion board, message forum or something with people who are touting the merits of his or her annuity.

I'm glad I got this!? 

Where are you? 🤔

The sales person told me (I asked him where are the fans) people of that generation aren't on the internet.  Okay  😕

[GailL1 · Accepted solution]

You might try the BogleHeads board - been around a very long time - named after the late Jack Bogle of the Vanguard fame.  They discuss everything investment & financial related.

Take a look - BogleHeads.org Forum Index

[larryk678000 · Accepted solution]

I am a retired financial advisor. In my estimation, 85% of the annuities sold are garbage.   The other 15% are fine but getting not only an honest agent/advisor but also one who is competent is a challenge.  Unfortunately, many agents who sell annuities could not explain the technical aspects of the annuity. The qualification to sell annuities is a test that any intelligent 6th-grader could pass.  Most people who sell annuities ate not advisors-they are salespeople plain and simple.  I do not want to disparage the 15% of agents or the 15% of annuities that are worthwhile. Finding them is the challenge. I might recommend looking for a "secondary annuity." These are annuities that people got as settlements for legal claims.  Now, the owner wants to sell.  They will take a discount.  I purchased a secondary annuity in 2009 with an 8% yield through 2028.  The annuity is from Metlife so your annuity will be from a solid company.  Best of luck.

[Tonster521]

@LutherF I don't know if there are a significant number of folks who talk or write about the merits of their annuities. There are various types of annuities (i.e., fixed interest rate, fixed index, variable, immediate income, etc.) which range from simple to complex regarding what the insurance company is insuring and guaranteeing. However, I think the majority buy an annuity to transfer risk in their efforts to guarantee income or principal. About 10 years ago, I bought a variable annuity wherein I could elect an aggressive equity allocation and insure the growth for about 40 basis points. For comparison purposes, 100 basis points is equal to a penny $0.01 on a $1.00. So, the cost for that guarantee was 4/10 of  a penny per $1.00. I thought that was a great deal inasmuch as I could obtain almost the same guarantee by buying put options for about 65 basis points. Moreover, that cost could vary year to year with market fluctuations. Another feature was that I could withdraw all gains from the annuity at any time which I have done on multiple occasions. Of course, the withdrawals reset the principal guarantee. The only issue was income taxes.I don't believe you can find a similar annuity today. Moreover, It is difficult to find an agent that is knowledgeable and will spend the time that is needed to develop a retirement strategy where an annuity may be an asset. The strategy for Retirement Planning has not changed, but the number have.  Annuity costs have increased due to lower interest rates that the insurance companies earn on their bond portfolios which is the main source of their guarantee.  At that time, my retirement asset allocation was about 90% equity and 10% fixed  income. My goal was to continue an aggressive equity strategy and reduce risk in a cost effective manner. My only regret was that I did not place more money into that particular annuity at  that time. A few years ago, I tried to find a similar arrangement, but learned that most insurance companies are charging anywhere from 1.0% to 1.5% for the same guarantees. You are clever to do your due diligence.

[larryk678000 · Accepted solution]

I am a retired financial advisor. In my estimation, 85% of the annuities sold are garbage.   The other 15% are fine but getting not only an honest agent/advisor but also one who is competent is a challenge.  Unfortunately, many agents who sell annuities could not explain the technical aspects of the annuity. The qualification to sell annuities is a test that any intelligent 6th-grader could pass.  Most people who sell annuities ate not advisors-they are salespeople plain and simple.  I do not want to disparage the 15% of agents or the 15% of annuities that are worthwhile. Finding them is the challenge. I might recommend looking for a "secondary annuity." These are annuities that people got as settlements for legal claims.  Now, the owner wants to sell.  They will take a discount.  I purchased a secondary annuity in 2009 with an 8% yield through 2028.  The annuity is from Metlife so your annuity will be from a solid company.  Best of luck.

[GailL1 · Accepted solution]

You might try the BogleHeads board - been around a very long time - named after the late Jack Bogle of the Vanguard fame.  They discuss everything investment & financial related.

Take a look - BogleHeads.org Forum Index

[sktn77a · Accepted solution]

Check out https://www.stantheannuityman.com/

Look at annuities as income insurance for the future - just like insurance, you may come up ahead or short.  They are NOT an investment and shouldn't figure into your retirement investment considerations.

[LutherF]

thanks