Index Annuity

Has anyone had any experience with an index annuity?

Re: Index Annuity

As a former financial advisor, I had recently had lunch with a colleague and
catch up on stuff. Since I left the firm just prior to the great market
crash of 2000 - 2002 I asked my friend how the "company" reacted to the
great loss in customer's accounts. He said it was very rough on the
advisors (in reality, salespersons). Some of the advisors were very
aggressive in their recommendations to clients and saw some huge losses
during the crash. They lost lots of business. Since the advisors get paid
by how much money they have under management their incomes suffered. But,
he told me that things had greatly improved since they now had a new product
that was "flying off the shelves". That new product is index annuities.
The commissions are huge, much higher than plain old mutual funds, and the
clients love the idea of "guaranteed" returns. In 2002 he couldn't make his
house payments and his wife had to go back to work. Today he bought a new
Lexus for cash and his wife quit work and is now back at the country club.
The Lexus was a windfall for putting a clients $800,000 IRA rollover into a
IA!! I asked if him if he told the sucker that an IRA is already tax
sheltered so an annuity is redundant. No, but the guy loved the guaranteed
feature. Go figure.



"Ralph Greenway" <> wrote in message
news:RZc8e.71318$
> Has anyone had any experience with an index annuity?
>

Re: Index Annuity

Marlowe" <> wrote in message
news:Vke8e.7559$

In 2002 he couldn't make his
> house payments and his wife had to go back to work. Today he bought a new
> Lexus for cash and his wife quit work and is now back at the country club.
> The Lexus was a windfall for putting a clients $800,000 IRA rollover into
> a IA!! >

So a financial advisor who is in trouble financially manages to get back on
track and then proceeds to buy a luxury car. I would be inclined to call
that mis-management of one's finances. I would think that instead of the car
and a country club membership he would put the money into something solid
and safe for the future. Perhaps with his history of advising clients, he
should knows about some good mutual funds that are solid and safe. Perhaps
he should invest his own money in one of them. I do wonder. Come to think of
it, I am not sure I would want to listen to financial advice from that
particular advisor.

Re: Index Annuity

Don, I cannot agree with you more. I wouldn't invest with my former
acquaintance either. He also follows the company's rule to buy and hold.
Not my cup of tea.

One thing I forgot to mention to Ralph is that mutual funds are under the
oversight of the SEC. Therefore there are many strict rules and regs that
have to be followed my not only the MF companies but also the necessary
disclosures that are required of people who sell them. Annuities, on the
other hand, are insurance products and fall outside the SEC. In all the
info I've seen on annuities they don't disclose how much commissions you pay
plus how much the life insurance part of the contract costs.


"Don" <> wrote in message
news:Zig8e.41373$
> Marlowe" <> wrote in message
> news:Vke8e.7559$
>
> In 2002 he couldn't make his
>> house payments and his wife had to go back to work. Today he bought a
>> new Lexus for cash and his wife quit work and is now back at the country
>> club. The Lexus was a windfall for putting a clients $800,000 IRA
>> rollover into a IA!! >
>
> So a financial advisor who is in trouble financially manages to get back
> on track and then proceeds to buy a luxury car. I would be inclined to
> call that mis-management of one's finances. I would think that instead of
> the car and a country club membership he would put the money into
> something solid and safe for the future. Perhaps with his history of
> advising clients, he should knows about some good mutual funds that are
> solid and safe. Perhaps he should invest his own money in one of them. I
> do wonder. Come to think of it, I am not sure I would want to listen to
> financial advice from that particular advisor.
>
>

Re: Index Annuity

"Marlowe" <> wrote in message
news:o5i8e.7557$
> Don, I cannot agree with you more. I wouldn't invest with my former
> acquaintance either. He also follows the company's rule to buy and hold.
> Not my cup of tea.
>
> One thing I forgot to mention to Ralph is that mutual funds are under the
> oversight of the SEC. Therefore there are many strict rules and regs that
> have to be followed my not only the MF companies but also the necessary
> disclosures that are required of people who sell them. Annuities, on the
> other hand, are insurance products and fall outside the SEC. In all the
> info I've seen on annuities they don't disclose how much commissions you
> pay plus how much the life insurance part of the contract costs.

The very word "annuity" makes me cringe. I wouldn't touch an annuity of any
type with a ten foot pole. My distaste for them, in fact, arises largely
from reading what people in this newsgroup have to say about them.

Re: Index Annuity

Annuities, on the
> > other hand, are insurance products and fall outside the SEC. In all the
> > info I've seen on annuities they don't disclose how much commissions you
> > pay plus how much the life insurance part of the contract costs.
>

Not all together true. Variable annuities are highly regulated by the NASD.

Fixed annuities- yes they fall outside of that regulation. An index annuity
is a fixed annuity.



> The very word "annuity" makes me cringe. I wouldn't touch an annuity of
any
> type with a ten foot pole. My distaste for them, in fact, arises largely
> from reading what people in this newsgroup have to say about them.
>
>

Ah, they have their upsides too. The term "annuity" means a series of
payments. They can provide a lifetime income. If interest rates were
better, this would be of more a benefit.

Re: Index Annuity

"Ricky Gentry" <> wrote in message
news:nkD8e.1689$
>
> Ah, they have their upsides too. The term "annuity" means a series of
> payments. They can provide a lifetime income. If interest rates were
> better, this would be of more a benefit.

If someone bought an annuity today and then interest rates climbed higher
and higher over the next ten years or so and that person were still alive, I
presume the annuity payments would seem paltry and that person would regret
the purchase. So I expect anyone who believes interest rates will not go
lower and will only go up would not buy an annuity at the present time. I do
not know about the lag between interest rates and annuity payments. I
presume if the interest rate shot up suddenly it would be months (?) or
years (?) before annuity payments would catch up. The term "risk" comes to
mind.

Re: Index Annuity

So I expect anyone who believes interest rates will not go
> lower and will only go up would not buy an annuity at the present time.

You are assuming that the person is buying to annuitize. That's not usually
the case. There may be other factors that filter into the decision-
guarantees, death benefit, choice of investments, upfront enhancements,
etc...


I do
> not know about the lag between interest rates and annuity payments. I
> presume if the interest rate shot up suddenly it would be months (?) or
> years (?) before annuity payments would catch up.

Depends on the underlying company. Remember, these guys are trying to be
competitive. The lag in time may not be very long.


The term "risk" comes to
> mind.
>

As always.

Re: Index Annuity

"Ricky Gentry" <> wrote

> You are assuming that the person is buying to annuitize. That's not
> usually
> the case. There may be other factors that filter into the decision-
> guarantees, death benefit,

That's what insurance is for.

> choice of investments,

You gotta be kidding.

> upfront enhancements,
> etc...

Bonuses are not free.

Re: Index Annuity

Here is what the salespeople are told about IA




"Ed" <> wrote in message
news:
>
> "Ricky Gentry" <> wrote
>
>> You are assuming that the person is buying to annuitize. That's not
>> usually
>> the case. There may be other factors that filter into the decision-
>> guarantees, death benefit,
>
> That's what insurance is for.
>
>> choice of investments,
>
> You gotta be kidding.
>
>> upfront enhancements,
>> etc...
>
> Bonuses are not free.
>
>
>

Re: Index Annuity

So I expect anyone who believes interest rates will not go
> lower and will only go up would not buy an annuity at the present time.

You are assuming that the person is buying to annuitize. That's not usually
the case. There may be other factors that filter into the decision-
guarantees, death benefit, choice of investments, upfront enhancements,
etc...


I do
> not know about the lag between interest rates and annuity payments. I
> presume if the interest rate shot up suddenly it would be months (?) or
> years (?) before annuity payments would catch up.

Depends on the underlying company. Remember, these guys are trying to be
competitive. The lag in time may not be very long.


The term "risk" comes to
> mind.
>

As always.

Re: Index Annuity

So I expect anyone who believes interest rates will not go
> lower and will only go up would not buy an annuity at the present time.

You are assuming that the person is buying to annuitize. That's not usually
the case. There may be other factors that filter into the decision-
guarantees, death benefit, choice of investments, upfront enhancements,
etc...


I do
> not know about the lag between interest rates and annuity payments. I
> presume if the interest rate shot up suddenly it would be months (?) or
> years (?) before annuity payments would catch up.

Depends on the underlying company. Remember, these guys are trying to be
competitive. The lag in time may not be very long.


The term "risk" comes to
> mind.
>

As always.

Re: Index Annuity

"Ricky Gentry" <> wrote

> You are assuming that the person is buying to annuitize. That's not
> usually
> the case. There may be other factors that filter into the decision-
> guarantees, death benefit, choice of investments, upfront enhancements,
> etc...

Why do I think you sell annuities?

Re: Index Annuity

"Ricky Gentry" <> wrote

> You are assuming that the person is buying to annuitize. That's not
> usually
> the case. There may be other factors that filter into the decision-
> guarantees, death benefit, choice of investments, upfront enhancements,
> etc...

Why do I think you sell; annuities?
Lucrative business isn't it?

Re: Index Annuity

> > You are assuming that the person is buying to annuitize. That's not
> > usually
> > the case. There may be other factors that filter into the decision-
> > guarantees, death benefit, choice of investments, upfront enhancements,
> > etc...
>
> Why do I think you sell annuities?
>
>

I do, but mainly on the fixed side (not index, but pure fixed rate). That's
usually the investment choice that mutual funds cannot offer.

And no, that part of the business is not lucrative for me.

Annuities can fit needs, just not to the point that some people use them.