Annuity

I have a variable annuity and I've heard that they are a terrible
investment. Just wondering if anyone had opinions about them?

Re: Annuity

In article <>,
"kerberos" <> wrote:

> I have a variable annuity and I've heard that they are a terrible
> investment. Just wondering if anyone had opinions about them?

A lot depends on your financial situation and your goals.
Without that info, no one has any idea if they are good or bad
for you. In general, the problem with annuities are when
crooked brokers and insurance sales people get people to cash
out IRA-qualified funds to put them into a an annuity, or sell
them an annuity inside of their IRAs. Anyone who sells that
to someone should go to jail for theft by swindle.

-john-

--
============================================================ ==========
John A. Weeks III 952-432-2708
Newave Communications
============================================================ ==========

Re: Annuity

Here are a couple of articles on the problems with variable annuities
from an investment standpoint:

www.dallasnews.com/sharedcontent/dws/bus/scottburns/columns/ 2005/stories/062105dnbusburns.2c86e1eb.html

www.dallasnews.com/sharedcontent/dws/bus/scottburns/columns/ 2005/stories/071205dnbusburns.98b11dec.html

And here is an index containing these and other articles

www.dallasnews.com/sharedcontent/dws/bus/scottburns/variable annuitywatch/

The reading is interesting, and not very flattering to the variable
annuity industry. The main problem with variable annuities is their
high expenses. Some low-expense variable annuity products are now
appearing from the likes of Fidelity and Vanguard.

Dave

Re: Annuity

Why did you buy it in the first place?

Some Variable Annuities are good investment tools for wealth accumulation,
for many people they will serve as their pension. With the development of
some of the newer products, thy have good living and death benefits such as
principal protection and access for long term care expenses.

Others are dogs, high surrender charges, long surrender periods, lousy
investment choices, over loaded with expenses.

It is a question of using the right tool for the right reason.


"kerberos" <> wrote in message
news:
>I have a variable annuity and I've heard that they are a terrible
> investment. Just wondering if anyone had opinions about them?
>

Re: Annuity

"kerberos" <> wrote in message
news:
> I have a variable annuity and I've heard that they are a terrible
> investment. Just wondering if anyone had opinions about them?
>

Please be aware that all that you will be getting are "individual's
opinion's",
usually NOT FACTUAL information..
I guess what it really boils down to is "how & why" you bought it.

IF you did the research, understood the workings of the contract, and
that it fits YOUR personality, then in all probability it is G O O D.

If however you did NOT do the research, do NOT really understand
how that particular contract works, and were "S O L D" the
policy, then it might turn out B A D for YOU, not necessarily a
BAD contract though.

Cal Lester CLU

Re: Annuity

The problem with the generalization about annuities in IRA is that there are
other valid reasons to use an annuity. Given it is double tax deferral, once
is enough, however for a person that can't get life insurance, the death
benefit maybe suitable.

Another reason is a good annuity will have different fund families that are
good in that particular asset allocation. And moving from one fund to
another has no cost within an annuity, where if you held the funds on there
own there would be charges.

Another reason is the development of principal protection. Many people saw a
lot of long earned gains evaporate in 2001 and 2002, with a variety of
principal protection options and shorter surrender periods to get this
protection.


In general, the problem with annuities are when
> crooked brokers and insurance sales people get people to cash
> out IRA-qualified funds to put them into a an annuity, or sell
> them an annuity inside of their IRAs. Anyone who sells that
> to someone should go to jail for theft by swindle.
>
> -john-
>
> --
> ============================================================ ==========
> John A. Weeks III 952-432-2708
> Newave Communications
> ============================================================ ==========
>

Re: Annuity

Very Well Put............
Cal Lester CLU



"BMS" <> wrote in message
news:
> The problem with the generalization about annuities in IRA is that there
are
> other valid reasons to use an annuity. Given it is double tax deferral,
once
> is enough, however for a person that can't get life insurance, the death
> benefit maybe suitable.
>
> Another reason is a good annuity will have different fund families that
are
> good in that particular asset allocation. And moving from one fund to
> another has no cost within an annuity, where if you held the funds on
there
> own there would be charges.
>
> Another reason is the development of principal protection. Many people saw
a
> lot of long earned gains evaporate in 2001 and 2002, with a variety of
> principal protection options and shorter surrender periods to get this
> protection.
>
>
> In general, the problem with annuities are when
> > crooked brokers and insurance sales people get people to cash
> > out IRA-qualified funds to put them into a an annuity, or sell
> > them an annuity inside of their IRAs. Anyone who sells that
> > to someone should go to jail for theft by swindle.
> >
> > -john-
> >
> > --
> > ============================================================ ==========
> > John A. Weeks III 952-432-2708
> > Newave Communications
> > ============================================================ ==========
> >
>

Re: Annuity

BMS wrote:
>however for a person that can't get life insurance, the death
>benefit maybe suitable.

But few people are willing to die to avoid market losses, which is all
the insurance covers.

>Another reason is a good annuity will have different fund families that are
>good in that particular asset allocation.

Different fund families are available outside annuities, too.

>And moving from one fund to
>another has no cost within an annuity, where if you held the funds on there
>own there would be charges.

But an annuity owner _is_ paying for the privilege in much higher fund
expenses. He is paying those expenses to the insurance company, rather
than the government, whether he exchanges or not. And those expenses
may exceed the income taxes involved in an exchange, especially if the
funds being liquidated have long-term capital gains.

>Another reason is the development of principal protection.

In my opinion, liquidity is the best form of principal protection. If I
don't like the investment for any reason, if it is liquid, I can bail
out and select something better. Not so with hefty termination fees
imposed for years and years by most annuities.

Dave

Re: Annuity

"John A. Weeks III" <> writes:

> In article <>,
> "kerberos" <> wrote:
>
> > I have a variable annuity and I've heard that they are a terrible
> > investment. Just wondering if anyone had opinions about them?
>
> A lot depends on your financial situation and your goals.
> Without that info, no one has any idea if they are good or bad
> for you.

Moreover, a lot depends on what you mean by "variable annuity".
VAs cover a wide variety of custom contracts and options and potential
underlying investments.


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Re: Annuity

< .
>
> Moreover, a lot depends on what you mean by "variable annuity".
> VAs cover a wide variety of custom contracts and options and potential
> underlying investments.
>


A Variable Annuity by any other name is still a ROSE....

The designation Variable Annuity signifies that the Cash Value
Account in the contract is invested, at the direction of the Annuitant,
in one or more of a basket of Mutual Funds (or other investment vehicles)
as stated IN the contract and it's value will rise and/or fall with the
market.
Whereas in an Annuity (sans the word variable) the Cash Value
Account is invested by the Carrier, and the Carrier pays a stipulated
Interest on that Account (as stated in the contract).

Cal Lester CLU

Re: Annuity

"Cal" <> writes:

> > Moreover, a lot depends on what you mean by "variable annuity".
> > VAs cover a wide variety of custom contracts and options and potential
> > underlying investments.
>
> The designation Variable Annuity signifies that the Cash Value
> Account in the contract is invested, at the direction of the Annuitant,
> in one or more of a basket of Mutual Funds (or other investment vehicles)

Yes, but that's just the start. There are potentially death
benefits, termination fees, etc. etc. The range of expenses
associated with VAs goes from 0.25% for a bare-bones no-frills
one to several percent with lots of the options.

If the OP is going to ask us if his VA is appropriate, not only
do we need to know about his overall financial situation, we
need to know about the VA, too. Just saying "VA" isn't enough.

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No HTML in E-Mail! --
Are you posting responses that are easy for others to follow?

Re: Annuity

John A. Weeks III wrote:
> In article <>,
> "kerberos" <> wrote:
>
> > I have a variable annuity and I've heard that they are a terrible
> > investment. Just wondering if anyone had opinions about them?
>
> A lot depends on your financial situation and your goals.
> Without that info, no one has any idea if they are good or bad
> for you. In general, the problem with annuities are when
> crooked brokers and insurance sales people get people to cash
> out IRA-qualified funds to put them into a an annuity, or sell
> them an annuity inside of their IRAs. Anyone who sells that
> to someone should go to jail for theft by swindle.
>
> -john-
>
> --
> ============================================================ ==========
> John A. Weeks III 952-432-2708
> Newave Communications
> ============================================================ ==========
While I agree with many of your responses, I must respectfully disagree
with this one.

Many uninformed people (professionals included) want to jump up on a
soapbox and scream to the world that buying an annuity inside a
qualified account is wrong because no one needs double taxation. What
most of these people miss is that there may be other reasons to use an
annuity inside a qualified account. Some of these reasons include a
death benefit, enhanced or not, and certain guarantees that don't exist
in other investments.

And it is just as misleading to argue against so called high fees in a
VA as it is for an agent to fail to explain them. Before anyone can
make a determination about whether the fees are acceptable one has to
know what they cover and make a decision about whether they provide
something of value to the person buying the annuity.

I've read hundreds of arguments on this NG and others about not buying
life insurance on an investment because you can buy cheaper term
insurance directly. I've heard people say that guaranteed living and
accumulation benefits are expensive and aren't worth it because it cuts
into the overall accumulation of the investment.

But I never hear complaints from the widow whose husband invested
aggressively inside an annuity and who had the misfortune to die when
the market was down - when she needed money she got back every penny he
put in PLUS the enhanced death benefit. In this case, the cost of
that rider was worth it to the widow.

For some VA investors, the riders and the surrender periods are the
ONLY thing that keeps them invested in the market. Without the
surrender periods many investors would continue to buy low and sell
high - chasing the market instead of being invested in it.

Without the safety net the riders can provide, many people would stick
to savings accounts - because they want safety! They want to KNOW that
they will be able to get back out all they put
in.

I will agree that VAs are NOT for everyone. It is important to
understand what a VA is and how it works - and they have a lot of
moving parts.

Remember - the RIGHT decision in an INFORMED decision - whether it
meets with your (or my) recommendation or not.

Gene E. Utterback, EA, RFC

Re: Annuity

Well Put

Cal Lester CLU




> While I agree with many of your responses, I must respectfully disagree
> with this one.
>
> Many uninformed people (professionals included) want to jump up on a
> soapbox and scream to the world that buying an annuity inside a
> qualified account is wrong because no one needs double taxation. What
> most of these people miss is that there may be other reasons to use an
> annuity inside a qualified account. Some of these reasons include a
> death benefit, enhanced or not, and certain guarantees that don't exist
> in other investments.
>
> And it is just as misleading to argue against so called high fees in a
> VA as it is for an agent to fail to explain them. Before anyone can
> make a determination about whether the fees are acceptable one has to
> know what they cover and make a decision about whether they provide
> something of value to the person buying the annuity.
>
> I've read hundreds of arguments on this NG and others about not buying
> life insurance on an investment because you can buy cheaper term
> insurance directly. I've heard people say that guaranteed living and
> accumulation benefits are expensive and aren't worth it because it cuts
> into the overall accumulation of the investment.
>
> But I never hear complaints from the widow whose husband invested
> aggressively inside an annuity and who had the misfortune to die when
> the market was down - when she needed money she got back every penny he
> put in PLUS the enhanced death benefit. In this case, the cost of
> that rider was worth it to the widow.
>
> For some VA investors, the riders and the surrender periods are the
> ONLY thing that keeps them invested in the market. Without the
> surrender periods many investors would continue to buy low and sell
> high - chasing the market instead of being invested in it.
>
> Without the safety net the riders can provide, many people would stick
> to savings accounts - because they want safety! They want to KNOW that
> they will be able to get back out all they put
> in.
>
> I will agree that VAs are NOT for everyone. It is important to
> understand what a VA is and how it works - and they have a lot of
> moving parts.
>
> Remember - the RIGHT decision in an INFORMED decision - whether it
> meets with your (or my) recommendation or not.
>
> Gene E. Utterback, EA, RFC
>

Re: Annuity

"Dave Dodson" <> wrote in message
news:

>>Another reason is a good annuity will have different fund families that
>>are
>>good in that particular asset allocation.
>
> Different fund families are available outside annuities, too.

An it costs you to move from one company to another. A second advantage is
that the insurance company monitors preformance and if a fund isn't working,
they toss it.
>
>>And moving from one fund to
>>another has no cost within an annuity, where if you held the funds on
>>there
>>own there would be charges.
>
> But an annuity owner _is_ paying for the privilege in much higher fund
> expenses. He is paying those expenses to the insurance company, rather
> than the government, whether he exchanges or not. And those expenses
> may exceed the income taxes involved in an exchange, especially if the
> funds being liquidated have long-term capital gains.

When you take in all the mutual fund expenses, many of today's annuities
meet or beat mutual funds.
>
>>Another reason is the development of principal protection.
>
> In my opinion, liquidity is the best form of principal protection. If I
> don't like the investment for any reason, if it is liquid, I can bail
> out and select something better. Not so with hefty termination fees
> imposed for years and years by most annuities.

Most annuities have surrender periods that are shorter than a CD

Re: Annuity

BMS wrote:

>> Different fund families are available outside annuities, too.
>
>And it costs you to move from one company to another.

I recently moved several hundred thousand dollars between two fund
families and it didn't cost me a dime. Not even a postage stamp.

>A second advantage is
>that the insurance company monitors preformance and if a fund isn't working,
>they toss it.

That is an unneeded service. If the investor uses a financial planner,
the planner should be doing that as part of his service. If the
investor chooses his own investments, he certainly can monitor them
himself. I do.

>When you take in all the mutual fund expenses, many of today's annuities
>meet or beat mutual funds.

My portfolio contains 13 funds, including large cap, mid cap, small
cap, growth, value, international, emerging markets, bond, index, and
money market funds. The lowest expense ratio is 0.10% (for an index
fund) and the highest is 1.20% (for the emerging markets fund). The
weighted expense ratio is 0.80%. How many annuities have expenses in
that range? If you sell annuities, what is the average expenses of the
annuities you have sold?

>Most annuities have surrender periods that are shorter than a CD.

But not shorter than any of my mutual funds, I'll bet.

Dave

Re: Annuity

> >
> > In my opinion, liquidity is the best form of principal protection. If I
> > don't like the investment for any reason, if it is liquid, I can bail
> > out and select something better. Not so with hefty termination fees
> > imposed for years and years by most annuities.
>
> Most annuities have surrender periods that are shorter than a CD
>

You just might want to temper the last line by substituting MANY for Most !
! ! ! ! !

Cal Lester CLU

Re: Annuity

Dave,

I'll give you credit for being somebody that understands what it takes to be
successful. I am a branch manager and have VA's that cost is about 1.15%

I'll bet that move between families was done at NAV. An investor such as
yourself would probably not be well served by using a VA. I would be curious
what your after tax yield is on your portfolio.

There are VAs that are as short as your Mutual Funds, anything shorter than
zero would mean that were giving you the money before you asked.

Good luck.

"Dave Dodson" <> wrote in message
news:
> BMS wrote:
>
>>> Different fund families are available outside annuities, too.
>>
>>And it costs you to move from one company to another.
>
> I recently moved several hundred thousand dollars between two fund
> families and it didn't cost me a dime. Not even a postage stamp.
>
>>A second advantage is
>>that the insurance company monitors preformance and if a fund isn't
>>working,
>>they toss it.
>
> That is an unneeded service. If the investor uses a financial planner,
> the planner should be doing that as part of his service. If the
> investor chooses his own investments, he certainly can monitor them
> himself. I do.
>
>>When you take in all the mutual fund expenses, many of today's annuities
>>meet or beat mutual funds.
>
> My portfolio contains 13 funds, including large cap, mid cap, small
> cap, growth, value, international, emerging markets, bond, index, and
> money market funds. The lowest expense ratio is 0.10% (for an index
> fund) and the highest is 1.20% (for the emerging markets fund). The
> weighted expense ratio is 0.80%. How many annuities have expenses in
> that range? If you sell annuities, what is the average expenses of the
> annuities you have sold?
>
>>Most annuities have surrender periods that are shorter than a CD.
>
> But not shorter than any of my mutual funds, I'll bet.
>
> Dave
>

Re: Annuity

BMS wrote:
>I would be curious what your after tax yield is on your portfolio.

Figuring the yield is a tough one. I would have to go through a stack
of statements to find all of the reinvested dividends. It's also a bit
messy since I added my social security benefits to one fund and took my
living expenses out of another. Let me just say that the total return
on the entire portfolio, after adjusting for the difference in
additions and distributions, was about 9.6%

Dave