<p>I don’t post much but lurk all the time, and I know there is so much knowledge on this board. Our life insurance agent just left, after discussing a variable annuity plan. As a way of background, neither DH or myself will have a pension, just 401k accounts that are pretty depressing these days. The upside of funding the annuity was a guarantee of 5.5%, but higher (extra1%) management fee for the guarantee. If the market went higher than we would get higher than 5.5%. We were interested in the sales pitch as we would like something that is more of a set amount, so we do not fear our quarterly 401k statements, but really did not know what questions to ask. Not that I am relying on strangers for financial advice, just wondering if you have had experience in variable annuities and what questions to ask, and what pitfalls there may be. Thanks so much!</p>
<p>" The upside of funding the annuity was a guarantee of 5.5%, but higher (extra1%) management fee for the guarantee. If the market went higher than we would get higher than 5.5%."</p>
<p>Ok…I am confused. To get the 5.5%…you have to pay an extra 1% fee…so you really get 4.5%…less the usual fees…so you get less than 4.5%?</p>
<p>So you don’t really get the 5.5%?</p>
<p>And how is the annuity funded? Do you pay a lump sum…and then you start getting annuity payments years later? How many years?</p>
<p>I listen to a financial talk show most days at lunch. The host’s big thing is “Ask if you had to get your money out in 30 days how much could you get?”. He’s very down on annuities because they are one of the highest “commission” sales instrument for brokers. Also, they are complicated and the average investor should generally stay away…just passing on his words.</p>
<p>We deposit a lump sum, there is a 7 or 8 year surrender fee. He said it was a 5.5% guarantee, but that the management fees were 1% higher than with a regular account.
It locks in each year and if the market is up you get the benefit, if it is down you get the guarantee of the 5.5%. It is so confusing.
However with no pension, anything with a guarantee sounds inviting.</p>
<p>Well…let’s say you buy a variable annuity for 200,000 in 2012… When do you start getting the payments? Is this an immediate or deferred annuity?</p>
<p>The surrender fee decreases over time until the seven years are up?</p>
<p>I am not getting the manage fee…maybe somebody else can chime in…</p>
<p>I like to use real money…makes thing simpler…</p>
<p>I pay 200,000… I get a minimum of 11,000 a year…for life? After all fees? Starting in year 1? There is no delay…in getting annuity payments?</p>
<p>What is the upside… What is the more than the 5.5% return based on? </p>
<p>What are your ages?</p>
<p>When you both die…the annuity has no value?</p>
<p>We have the older and newer “lifetime withdrawal guarantee (LWG)” annuities. We are transitioning and moving money into newer annuity. We have annuities for some of our assets because in 2000, 2001-2004, and 2008-2009 (which I was a month too slow) we lost a lot of IRA & 401k investments as did everyone else. I think am again too slow to move money to annuity - Congress is unable to solve our Nation’s ills and I am ticked when it costs me $$$$.</p>
<p>For me, a feature of annuity is the return of account value (original or reset value) on death of owner. I will pay for the death insurance premium in the annuity because the premium is much smaller than our term life insurance. The death premium is a percentage of the actual account value and is not base on age or health. It is my belief that going for the highest yield also increases risk. I wanted to transfer my personal investment risk inherent to IRA/401k mutual funds to the insurance company’s annuity. Annuities are my hedge.</p>
<p>The newer LWG annuity has a feature where there are two accounts (if chosen and has the extra fee). There is the actual account value for death value calculation and the LWG value that has the growth guarantee. Both accounts are variable. The LWG value either accumulates by the guaranteed amount or the variable amount whichever is greater. The LWG increase guarantee, is for a fixed number of years after which the LWG becomes fully variable. </p>
<p>The annuities is a part of our portfolio in addition to a small pension, SS, trading account and IRA/401k. WSJ had a recent article on annuities earlier this month, I think it was on the first Monday of Nov. Clued my brother to this article since is will be retiring very soon. </p>
<p>It is my belief that going for the highest yield also increases risk. Seek many presentations and companies.</p>
<p>If I had to rely on TV talk show hosts (post #3) I’d be broke, and without insurances, retirement, or a spouse. Everyone works on a “commission”, if you don’t do your job-you don’t get paid.</p>