What about annuities?

3,642 Views | 18 Replies | Last: 2 yr ago by aggiebrad94
chris1515
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7:16p, 7/25/23
AG
https://digital.fidelity.com/prgw/digital/gie/

What are y'all's thoughts on annuities?

Without getting wrapped up in all the different options, I'm thinking about just a basic income annuity where I pay $X today and receive guaranteed payments for life of $Y starting at some point in the future.

Worth it?

the appeal comes from the idea that if I live "too long" that would be a nice safety net.

my impression is these have a history of shady sales tactics and inflated commissions. But, I assume there are some good options out there someplace.
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TheBonifaceOption
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7:22p, 7/25/23

877-CASH-NOW
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Brian Earl Spilner
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8:33p, 7/25/23
AG
Damn it. Too late.
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billydean05
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10:28a, 7/26/23
I think that if you do not have your essential expenses covered by social security and other pensions and are close to the cusp of if you have enough to retire or not, then an immediate annuity could be a good option for a portion of the clients assets.
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Stive
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10:30a, 7/26/23
AG
They have their place.

They're oversold and put in place for the wrong reasons by salesmen, but when used correctly in the right situation, they can be extremely effective at shoring up a retirement plan.
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JSKolache
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10:32p, 7/26/23
AG
Not interested, at all. Annuities are a great way for other people to make money off of your savings.
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OldArmyCT
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4:22a, 7/27/23
AG
How old are you? How large is your RMD? A&M sells these as part of their estate planning "service."
https://www.wsj.com/articles/retirement-tax-break-qlac-annuity-contract-ee88fe4c?st=didwyikfu1rswwz&reflink=desktopwebshare_permalink
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aggiebrad94
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9:21a, 7/27/23
AG
They are expensive but for those that want predictable income they can't outlive, they're worth the expense.

I see one now that offers a 14% simple interest credit for 5 years and then a 7% payout for a 73 year old. I've run several calculations and that equates to an 8% annualized return on your money.

It's a great tool to keep most of your assets invested but still carve out some safe income.
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Stat Monitor Repairman
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1:50p, 7/27/23
It's important to remember that annuity is an insurance product.

If you've got exposure to the banking and finance markets then an annuity might be a reasonable diversification of assets across the three main industries of banking, finance and insurance. If the insurance market catastrophically fails then we all ded anyway so it wont matter in the end.

Second, an annuity might be a good option in that once it's done, the money is not easily accessible.

The way things are going nowadays with retirees getting scammed in all sorts of ways, having a pot of money inaccessible and locked in might be in the best interest of a retired person or disabled person.

An annuity is set it and forget it, so it offers protection against churning by financial firms or dicking around with the funds by some other means.

This is a consideration when you are dealing with someone with dementia or that is getting loopy and unpredictable with regard to spending money that they shouldn't spend. So an annuity offers security in that regard in that it forecloses easy access to the principal.

So for an older person that wants to have some level of financial security spread across different markets, it's not entirely a bad fall back plan. It's essentially giving someone a supplement to their social security check that isn't going anywhere.

The downside of annuities is in the case of a fixed annuity product thats locked in, you might not be keeping up with rising interest rates and overall devaluation of the currency.

So an annuity can be a part of a plan, but is probably not a good idea if that's the basis of your whole plan.
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Baby Billy
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6:44p, 7/27/23
AG
Annuities are garbage. Hope that helps
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ATXAdvisor
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9:04p, 7/27/23
AG
TL;DR
Immediate Annuities - Can be good is some situations
Fixed deferred annuities - Can be good in some situations
Variable deferred annuities- Generally bad, but low cost options available
Indexed annuities - Generally bad

Note - I am not in the insurance business but I was licensed for about 20 years earlier in my life…

Immediate annuities are the original variant that offer a guaranteed payment for a period or life. These can be useful in some cases but the main concern is starting the irrevocable lifetime payment and then dying early. The flip side is that those that live past life expectancy (50% of us do), the total payouts exceed what you could have produced with similar credit risk.

Fixed Deferred Annuities look and act very much like bank CD's but the interest is tax deferred and is subject to early withdrawal penalties from the insurance company as well as by the IRS if you are under age 59.5.

Variable deferred annuities are basically tax deferred mutual funds that have the earnings taxed as income when withdrawn. The insurance company likely charges early withdrawal penalties for a number of years and earnings are subject to 10% penalties if withdrawn < age 59.5.

Rarely do variable annuities justify the higher taxes on earnings or the expenses they charge. I have seen people sold these products with a variety of riders that exceeded 4%/yr in fees.

If you have had the misfortune of being sold one of these products and actually have profits, you can transfer to low cost options at places like Nationwide (as little as $240/yr in insurance fees), Fidelity, Vanguard, etc.

Finally, there are equity indexed annuities. These typically offer some form of minimum guaranteed return along with the ability to participate in higher returns of other things, such as the S&P 500. These products are complicated and frequently fail to live up to the salespersons promises due to fees and formulas that benefit the insurance company much more than they do the contract owner.
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b0ridi
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In reply to ATXAdvisor • 10:50a, 7/30/23
ATXAdvisor said:
TL;DR
Immediate Annuities - Can be good is some situations
Fixed deferred annuities - Can be good in some situations
Variable deferred annuities- Generally bad, but low cost options available
Indexed annuities - Generally bad

Note - I am not in the insurance business but I was licensed for about 20 years earlier in my life…
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Thoughts on TIAA Traditional / TIAA-CREF Variable Annuities available through an employer's 403(b)?
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bicmitchum
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11:12a, 7/30/23
the only people that i have ever talked to that had anything good to say about them are the people that sell them.
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ATXAdvisor
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In reply to b0ridi • 11:34a, 7/30/23
AG
b0ridi said:
ATXAdvisor said:
TL;DR
Immediate Annuities - Can be good is some situations
Fixed deferred annuities - Can be good in some situations
Variable deferred annuities- Generally bad, but low cost options available
Indexed annuities - Generally bad

Note - I am not in the insurance business but I was licensed for about 20 years earlier in my life…
.
.
.
Thoughts on TIAA Traditional / TIAA-CREF Variable Annuities available through an employer's 403(b)?


TIAA (Teachers Insurance and Annuity) is traditionally offered in non-profit 403b plans of colleges and hospitals. TIAA was the annuity side (primarily offering an immediate annuity product for guaranteed lifetime income) while CREF (College Retirement Equity Fund) was the mutual fund part of the business. They later aquired Nuveen (another mutual fund company) and changed their name to just TIAA.

They are a good company with some good offerings on the fund side and their insurance and annuity solutions are very competitive. Their insurance products are very competitively priced (annuities and life insurance) and can be great solutions in the right circumstances. That being said, there are usually better solutions on the fund side, IMO.
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RebAg13
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In reply to ATXAdvisor • 8:51p, 8/3/23
AG
ATXAdvisor said:
b0ridi said:
ATXAdvisor said:
TL;DR
Immediate Annuities - Can be good is some situations
Fixed deferred annuities - Can be good in some situations
Variable deferred annuities- Generally bad, but low cost options available
Indexed annuities - Generally bad

Note - I am not in the insurance business but I was licensed for about 20 years earlier in my life…
.
.
.
Thoughts on TIAA Traditional / TIAA-CREF Variable Annuities available through an employer's 403(b)?


TIAA (Teachers Insurance and Annuity) is traditionally offered in non-profit 403b plans of colleges and hospitals. TIAA was the annuity side (primarily offering an immediate annuity product for guaranteed lifetime income) while CREF (College Retirement Equity Fund) was the mutual fund part of the business. They later aquired Nuveen (another mutual fund company) and changed their name to just TIAA.

They are a good company with some good offerings on the fund side and their insurance and annuity solutions are very competitive. Their insurance products are very competitively priced (annuities and life insurance) and can be great solutions in the right circumstances. That being said, there are usually better solutions on the fund side, IMO.
Nailed it. Tiaa is a leader in annuities. Investment side is industry average.
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poundstone
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In reply to b0ridi • 10:03p, 8/3/23
.
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Ducks4brkfast
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2:09p, 8/4/23
AG
I'm in a fixed index annuity that is capped at 11.5% (I just missed 12%), with downside risk of 1%. Tracks S&P500.
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RebAg13
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In reply to poundstone • 9:14p, 8/4/23
AG
poundstone said:
Kinda side note, TIAA Cref has the worst customer service second only to Voya


Get the wrong forms mailed?
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aggiebrad94
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In reply to b0ridi • 9:19a, 8/8/23
AG
b0ridi said:
ATXAdvisor said:
TL;DR
Immediate Annuities - Can be good is some situations
Fixed deferred annuities - Can be good in some situations
Variable deferred annuities- Generally bad, but low cost options available
Indexed annuities - Generally bad

Note - I am not in the insurance business but I was licensed for about 20 years earlier in my life…
.
.
.
Thoughts on TIAA Traditional / TIAA-CREF Variable Annuities available through an employer's 403(b)?
Depends on what your other options are. I would want an index fund over anything from TIAA.
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