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Thread: Annuities

  1. #1


    DH and I are retired, in our 70's and are thinking of buying an annuity which guarantees a set amount per month.
    I can't understand how they can guarantee 5% or more when interest rates are so low. I'd like to invest in the same things they're investing in! LOL!
    Annuities used to have a bad reputation but I think they're much better now. We just sold a vacation house and have some funds to invest.

  2. #2
    I can't understand that either. DH and I looked for a "safe" place to put our money - the financial advisor said he could put it in an account and pay us 5% a month; and it would only cost us a management fee of 2% a year. sounds fishy doesn't it. Well, I kept asking him how it earned 5%; finally he admitted it didn't earn, they paid us our money at 5% a month in otherwords they kept our money, charged us 2% a year to dole our own money back to us monthly. Whatever it earned in that account depended on the market and could be nothing to whatever. I said I didn't need someone to charge me to dole our own money back. I settled for the 1.25 % the bank pays me in checking.

  3. #3
    The seller of most annuities get quite a large payment on the front end. Just be very careful. I am 62 and with this economy I wouldn't want to tie my money up long term like an annuity. JMHO Too many things can happen where I might need money. I would separate it into CD's even though they aren't paying much now. But I don't know your money situation, income, etc. You might check with vanguaard or fidelity.

  4. #4
    The best annuity is the one agents like the least: an immediate annuity. It has the least fees and commissions, but you'll get more $$$ monthly by waiting until you're older. That's just the way annuities work: you have a shorter life expectancy, so the policy pays you back faster.
    You should also be aware that the standard advice from CFPs is to not put more than 30% of your portfolio assets into annuities.
    Annuities are dependent upon the health of the insurance company staying in business. Stick with well-rated carriers, and find out what your state's limit is on annuity reimbursement should the carrier fail. It's very common for people to buy several annuities over time, and usually they buy them all from one insurer.
    Unfortunately, in the event the insurance company goes under, the State Insurance Commissioner will liquidate the assets and return funds to the policyholders. But there is a legal $$ limit on liability for different types of insurance policies. It's the responsibility of the consumer to know what the limit is for their own state of domicile. In most states it's $100K, but it can and does, vary.

  5. #5
    calirose, if that 'advisor' is a CFP, you should report him IMMEDIATELY to the SEC and state licensing board for breach of fiduciary duty.
    And you shouldn't check with any brokerage about annuities. These are sold by insurance companies, and any brokerage selling them to you is making management fees off it. Insurance agents make commissions with the carrier charging mgmt fees too, but at least you know that up-front.
    Always deduct the annual management fee from the annual interest rate they're paying you. You may find there's not a great deal of difference in buying a 10-yr CD and having your money tied up in a 10 yr non-surrender annuity.
    When interest rates are low it's not a great time to be buying annuities. The high guaranteed rates paid in previous years have come back to bite the insurers and rates are now much lower. You also need to be aware that fees on annuities are steep, and it will tie up your money for 7-15 years due to a standard non-surrender provision. So if there is any chance you might need those funds, do NOT put them into an annuity.

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