GRS Home  Forum Home
Bank Rates Center
   Savings Account Rates
   Money Market Rates
   Highest CD Rates
Insurance Rates Center
  Auto           Health
   Life              Home
Mortgage Rates Center
  Mortgage Rates
  Mortgage Quotes

Last visit was:
A place for Get Rich Slowly readers to ask questions
and exchange ideas
It is currently Sat Apr 19, 2014 11:09 am




Post new topic Reply to topic  [ 9 posts ] 
Author Message
 Post subject: Annuities
PostPosted: Sun Aug 05, 2012 1:18 pm 

Joined: Sun Aug 05, 2012 7:40 am
Posts: 3
Good day
I am 52 years old and presently I have a military retirement of 3K monthly check(after taxes). Because of all the market crazyness I purchased a hybrid annuity from a company called "Security Benefit" last year. Obviously, not the greatest but it is giving me an annual roll-up guarranteed @ 8.2%. I only put in 45K and at age 65yrs old it should pay out about $1,200.00 monthly. This is a Roth IRA so it will be tax free income.
I also work for the federal government so I have TSP (401K) that I put 16% of a 80K salary.
I am thinking about purchasing another annuity for 75K and would like to hear your thoughts on this?

Thanks so much


Top
Offline Profile E-mail   
 Post subject: Re: Annuities
PostPosted: Sun Aug 05, 2012 2:02 pm 
Moderator

Joined: Wed Sep 23, 2009 9:01 am
Posts: 5209
cnocmmz wrote:
... I purchased a hybrid annuity from a company called "Security Benefit" last year. Obviously, not the greatest but it is giving me an annual roll-up guarranteed @ 8.2%. I only put in 45K and at age 65yrs old it should pay out about $1,200.00 monthly.

I am thinking about purchasing another annuity for 75K and would like to hear your thoughts on this?


i STRONGLY suggest you check your math and READ your contract before buying another annuity. Those numbers do not make any sense unless Security Benefit is trying to go bankrupt...in which case your annuity will be worthless.

If they pay you a guaranteed 8.2% between now and when you are 65 (which is highly unlikely since risk free rates are currently about 2%) your $45k will be worth about $125000. Paying $1200 a month on that is 11% or more, also not sustainable in this environment.

Since I don't know what you bought, I really can't comment further. All I can say is that it is extremely unlikely you could have bought what you say you have with a guarantee anytime in the last 30 years.


Top
Offline Profile E-mail   
 Post subject: Re: Annuities
PostPosted: Sun Aug 05, 2012 2:50 pm 

Joined: Sun Aug 05, 2012 7:40 am
Posts: 3
Yes, must of mis spoke on the return. I meant to say, benefit base roll-up @8.2% is this case means accumilation phase with the GLWB Rider. Annual income payout at 5.5 %. As you know the actual account value is much different @2% Interest. I will be getting about 14K annually. I hope this did clarify?


Top
Offline Profile E-mail   
 Post subject: Re: Annuities
PostPosted: Mon Aug 06, 2012 8:17 am 

Joined: Sat Jun 16, 2012 8:06 am
Posts: 79
It doesn't sound like you did a lot of research, and with annuities that's dangerous. They're complex financial instruments, and I wouldn't touch one without the advice of a good neutral fiduciary advisor (of which I have access to two, both independent CFPs - but most people aren't that fortunate).

First of all, a quick Googling brought up this: February 27, 2009-- A.M. Best Co. has downgraded the financial strength rating to B from B++ and issuer credit ratings to “bb” from “bbb+” of Security Benefit Life Insurance Company and its wholly owned subsidiary, First Security Benefit Life Insurance and Annuity Company of New York .

So....not a well-rated company. Not the worst, but definitely not the best. What kind of fees are you paying, and what funds are you offered for investing? I don't need to know this, but YOU do. These two points are the difference between a good annuity and a poor one.

Second: Do you know what your state's limit is on annuity reimbursements should the company fail? You cannot always assume that if the company 'goes under', the assets that can be sold will cover the full amount of your policy. In that case, the state insurance fund takes over, and they only count a claim as per INSURER, not per policy. You could have five annuities with one insurer and if the worst case happens, the state will consider all five as simply one claim.

In today's low interest rate environment, annuities are not a particularly good investment. If all the analysts are right and interest rates inevitably must rise, you would be better off waiting to make the additional annuity investment. Once you lock yourself into a bad annuity you will have wasted a great deal of your money on fees that are unrecoverable. Even with a future 1035 tax exchange, the money that is already gone, will always be lost.


Top
Offline Profile E-mail   
 Post subject: Re: Annuities
PostPosted: Mon Aug 06, 2012 9:32 am 
Moderator

Joined: Wed Sep 23, 2009 9:01 am
Posts: 5209
jaiko wrote:
First of all, a quick Googling brought up this: February 27, 2009-- A.M. Best Co. has downgraded the financial strength rating to B from B++ and issuer credit ratings to “bb” from “bbb+” of Security Benefit Life Insurance Company and its wholly owned subsidiary, First Security Benefit Life Insurance and Annuity Company of New York .


I suspected something like this.

One thing that happens when companies get desperate is that they start focusing on getting revenue rolling in at the expense of the future. The way to do that with insurance/annuities is to offer very good return rates. The problem is, those returns are worthless if the company is unable to pay them when you need them. And that becomes much more likely when the returns are high.


Top
Offline Profile E-mail   
 Post subject: Re: Annuities
PostPosted: Mon Aug 06, 2012 11:35 am 

Joined: Mon Nov 01, 2010 5:15 pm
Posts: 1095
DoingHomework wrote:
jaiko wrote:
First of all, a quick Googling brought up this: February 27, 2009-- A.M. Best Co. has downgraded the financial strength rating to B from B++ and issuer credit ratings to “bb” from “bbb+” of Security Benefit Life Insurance Company and its wholly owned subsidiary, First Security Benefit Life Insurance and Annuity Company of New York .


I suspected something like this.

One thing that happens when companies get desperate is that they start focusing on getting revenue rolling in at the expense of the future. The way to do that with insurance/annuities is to offer very good return rates. The problem is, those returns are worthless if the company is unable to pay them when you need them. And that becomes much more likely when the returns are high.

But those returns are guaranteed!!! [/end sarcasm]

Reminds me of a Chris Farley quote from the movie Tommy Boy:

Quote:
Because they know all they sold ya was a guaranteed piece of sh*t. That's all it is, isn't it? Hey, if you want me to take a dump in a box and mark it guaranteed, I will. I got spare time.


Top
Offline Profile E-mail   
 Post subject: Re: Annuities
PostPosted: Mon Aug 06, 2012 5:45 pm 

Joined: Sun Aug 05, 2012 7:40 am
Posts: 3
Sorry for asking for advice on annuities, for it seems like a lot folks responding got burnt or new someone who did!
I will say normally, insurance companies have to be backed by 3 other companies if they fail. :hai:


Top
Offline Profile E-mail   
 Post subject: Re: Annuities
PostPosted: Mon Aug 06, 2012 5:56 pm 

Joined: Mon Nov 01, 2010 5:15 pm
Posts: 1095
cnocmmz wrote:
I will say normally, insurance companies have to be backed by 3 other companies if they fail. :hai:

Who told you that?


Top
Offline Profile E-mail   
 Post subject: Re: Annuities
PostPosted: Mon Aug 06, 2012 10:07 pm 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
the only annuity one should buy is an SPIA. the conversation for the need to purchase an annuity is separate from the topic du jour, le crappy hybrid annuity. a couple of notes (more rhetorical questions) on hybrid annuities:

-are you really able to fully understand how these things work? Do you know all the fees?
-if one is scurred of market volatility, what is the point of purchasing an annuity with a variable component?
-do you really think you will invest $45k and come out with $1200/mo? If true, enjoy that 32% annual ROR and I am (jealously) happy for you. I personally will grovel in the 2-4% range.

to answer the question of if you should buy another, only you can answer that. I would personally only buy enough to cover my "bare bones" expenses. The point of this is bring stability to one's portfolio. If you've purchased something like a hybrid annuity, you've lost a lot of the reason to buy an annuity since some of the annuity is variable, which I can pretty much guarantee will do worse than your own money in the market net of fees/commissions/etc. I've always found purchasing annuities to be expensive, especially today with low interest rates. They are expensive b/c you swap return for stability.

If you believe the ridiculous returns you are cited, by all means, buy away. If I thought I could truly get a 32% return, I would do it in a new york minute. I am greatly skeptical you will reap even a fraction of that. And that is beside all the talk of insurance company ratings. If I were to buy an annuity, it would be an SPIA through either Berkshire or Vanguard.

Either way, good luck.

_________________
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


Top
Offline Profile E-mail   
Display posts from previous:  Sort by  
Post new topic Reply to topic  [ 9 posts ]  Moderators: bpgui, JerichoHill


Who is online

Users browsing this forum: Yahoo [Bot] and 2 guests


You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot post attachments in this forum

Search for:
Jump to:  
Powered by phpBB © 2000, 2002, 2005, 2007 phpBB Group
Theme created StylerBB.net & kodeki