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Re: Anyone know the good, bad, ugly of QLAC's

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@ASTRAEA

You can choose the "refund" option to allow your deposit to go to your name beneficiaries.  By choosing this option your income will be a little lower than the full "Life only" option.  You can also add your spouse for the income payments which cut down the risk of lossing the income

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Re: Anyone know the good, bad, ugly of QLAC's

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@larryk678000

If you can tell me when someone dies, when the payments end, then I can figure out the return of the QLAC.  Its all about INCOME in retirement.

 

Example:

1. S&P500 fund $100,000 getting 8% annually would give you $215,893 in 10 years (4% income, $8,636/yr) Google "4% rule"

   vs

2. QLAC $100,000 at age 61, Male income at age 71 would give you $13,356 income for life!

 

The QLAC gives you $4,720 MORE guaranteed income for life than the S&P 500 portfolio.  You don't have to wait until age 85 to start income with a QLAC.  anytime from deposit to age 85 to statt income.

-income rates at www.QLACQuote.com/get-quote

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Re: Anyone know the good, bad, ugly of QLAC's

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This is also the reason why our government did not allow the Securities Companies to sell QLAC. You can not have guarantees if it involves market risks.
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Re: Anyone know the good, bad, ugly of QLAC's

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I admit I am not the best speller.  So I promise that I will pick on others for their mispelling.  However, I will pick on negligance on facts.  Let us take your suggestion with the lady that purchased QLAC (a version of Guaranteed Income Annuity).  Since I am not a fortunate teller, I can not look into the future.  Hence, I have to use history as a point of reference (even though according to some, it is not likely to repeat)...

So, my client purchased 125,000 worith of S&P 500 stocks around 1st week of August 2000.  Tossing out commission and dividents, she will receive 88.03 share at $1420

YearS&P 500Value
20001420125000
2004106493663.92
20081296114086.9
20121391122449.7
20162183192169.5
20182820248244.6

 

So as of today, if my client took your advice she would have profited $123,103.  Basically at a withdrawl rate of $1700 per month, that profit would have lasted her 6 years until it eats into her principle $125,000 (reglardless of the value of the $).  Which is all good, until you realize that it took you 18 years to generate 6 years of income!  You're right, I am using history to scare the readers.  You're right history never repeats.  You tell that to the seniors who worked at Walmart between 2000 and 2014 who could not retire because they could not withdrawl from their principle retirement accounts which were tied to the market.

BTW, the average return on the S&P 500 between 2000 to today is around 5.48% (as you can see).  However, in reality it is no better than the same account receiving a fixed annual 4.12%.  You can see the evidence below;

2000125000
2001124999
2002130148.9
2003135511.1
2004141094.1
2005146907.2
2006152959.8
2007159261.7
2008165823.3
2009172655.2
2010179768.6
2011187175.1
2012194886.7
2013202916
2014211276.1
2015219980.7
2016229043.9
2017238480.5
2018248305.9

 

Here is another thing...  if you actually purchased a deferred income annuity back in 2000.  You would have received a monthly income of well over $2,000 per month.

On the finaly assessment of your suggestion that inflation is the enemy.  I don't disagree, but might I remind you, inflation, deflation, staggnation, hyper inflation, and a host of other possible economic issues may all be unknow risks that become problem....  However, it is only a problem if the client live that long...  Therefore isn't the unknown in the story of longivity the issue at play here...  I don't suggest people to avoid the growth in the market, but I would not paint a rosy picture neither.  You can do so with your money.... More power to you.  My client chose use a portion of her $ to have a safety net.  You clearly didn't know people who had to work at Walmart.

Peace,

Steven Chao

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Re: Anyone know the good, bad, ugly of QLAC's

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So,  you get really "irritated" when money managers "skew" facts to make that "extra" commission,  do you? 

 

But it's okay for annuity salesmen to do the same,  huh?  

 

Congratulations on that sale to the 64 year old woman.  Who is going to get a whopping $1,700 a month starting sixteen years from now.   Did you tell her what that $1,700 will mean in actual dollars in the year 2034?   Or did you tell her what her $125,000 would grow to -  based on historical returns -  if she put it all in VG Index500 and just forgot about it for 16 years? 

 

No,  friend,  market volatility and "longivity" as you put it are not the biggest threats to sr. citizens.   Inflation is the bigger threat.  And the best protection against that is to develop a disciplined plan of investing in low-cost,  no-load mutual funds with an emphasis on asset allocation (AA).  Re-balancing when appropriate for aging. 

 

There is good reason why annuities have always had a bad rep.  Nothing has changed.  Salesmen still trot out the gloom and doom talk of a bear market coming,  other scare tactics.   Hoping that the prospect is too feeble-minded to look up the published average annual returns of stock investing since 1926.  Which is around 10%

 

btw,  have you heard of spell check?  It's L O N G E V I T Y,   not  Longivity. 

 

Bye,  bye 

 

 

 

 

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Re: Anyone know the good, bad, ugly of QLAC's

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QLAC is one of the best hedge against longivity and the volatility of the market.  Remember, this is NOT all your retirement.  It is most likely that some of your retirement are still invested in the growth sectors (through your multiple mutual funds).

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Re: Anyone know the good, bad, ugly of QLAC's

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I am sorry, but may I suggest that you check your sources.  QLAC stands for Qualified Longivity Annuity Contract.  It is a setup so that a portion of the seniors' long term savings are NOT EXPOSED to the risks of the market's volatilities.  How is that ever a BAD thing, when us seniors do not know when we may kick the bucket or required higher withdrawls?  The whole goal of the QLAC is not about the returns but to deferr a portion (the lesser of the $130,000 or 1/4 of your retirement savings) to a later RMD (Required Minimum Distribution) age of 85 from 70.5.   So for those who are able to plan out their usage, they can move their retirement to a GUARANTEED payment schedule and earning.

This move tend to take $ away from money managers who see it as a threat to their managed portfolios.  In reality, it is a lower risk, as the pay out is far more than your suggested 1%.  The payment is based upon # of years in deferral, and your age.  I have a female 64, who chose to put away $125,000 till age 80.  At that time (age 80), she will receive a little over $1700 per month for the rest of her life....  GUARANTEED, as stated on the contract per requirement from our government.  It will not matter if the market goes up nor down...

This was an important piece that the securities (401K) and mutual fund companies avoid...  It helps seniors to put their retirements away in a GUARANTEED CONTRACTS that is at a VERY REASONABLE RETURNS so that their retirements are away from the volatilities of the market....  Think how you would feel when 2008 rolled around and suddenly over 1/3 of your retirement evaporated overnight.  And it took nearly 6 years for it to get back to where it was IF YOU DON'T TOUCH THE PRINCIPLE... imagine all the seniors who had to live off the principles at the time!!!!!!!  They pretty much will never be able to get back to even!!!!!!  I really get irritated when people skew the facts to make that extra commission....  I am in that business, but there is not need twist the facts.

Peace,

Steven Chao

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Re: Anyone know the good, bad, ugly of QLAC's

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It's a fixed annuity plain and simple.  When used in an IRA, you don't need to take distributions from it until age 85 (rather than age 70.5).   If you are a conservative investor, this may be fine for you as fixed annuities typically pay 1% more than long-term CDs at the bank.  Currently, the yields on QLACs is 3-4%.  You won't ever see that rate published--you need to know how to use a financial calculator.  You cannot lose money (assuming the insurance company stays in business, which is a very good best given the low rate they pay you).  For an investor who usually chooses mutual funds, QLACs will likely not be a rewarding investment.

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Re: Anyone know the good, bad, ugly of QLAC's

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@ASTRAEA You can also buy a QLAC with a total refund option on it where you don't lose your deposit.  I ran some numbers at QlacQuote.com for a 64 year old female starting income at age 85.  Life only (No return of $) at age 85 $3,467/month vs. total refund at death $2,758.  Loss some income with the refund option but they both give lifetime income.

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Re: Anyone know the good, bad, ugly of QLAC's

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I won't repeat the basics you can get by googling "what is a qlac."

What I can tell you is to think of it exactly like an immediate annuity with payments starting at age 85 (rather than now).

 

You do not want to buy a qlac or immediate annuity now because you get stuck with a very low interest rate.  THE INSURANCE COMPANY WILL NOT TELL YOU THE RATE!  (It would be very good for AARP to lobby for disclosure of the rate with the NAIC.  It is a clear and obvious taking advantage of seni0ors--those who buy these products--to not disclose the rate).  The insurance companies will tell you how much to deposit and how much you will get as a payout.  YOU need to calculate that compounded rate of return (you would think your financial advisor could do this, but most do not have the competence - ask your CPA).

 

If you die before age 85 or before you have recovered your initial deposit, you are guaranteed to get back whatever you invested (with 0% interest).

 

It occurs to me that an investor who has done well in stocks and wants to remain in stocks may be best suited for a QLAC (or a deferred longevity annuity). It allows the investor to take risk while knowing that they have a guaranteed income later in life (i.e, it is a good emotional tool)

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