Annuity - good or bad

[szvacek]

My wife is retiring this year from teaching in Missouri. The have a great retirement system. A gentleman from a company called Ameritime stop by Saturday and presented a program where instead of just getting a monthly benefit from the state retirement system, we would pull some of the value out in a lump sum and invest in a fixed annuity with a smaller monthly from the system. In the past I was not a fan of annuities, but have time changes? Still have a question whether this is a good thing or not. He stated he could get a 6% annual disbursement. I believe that very high. Help!

[sweeps]

There isn't anything inherently wrong with a fixed annuity from a reputable company. Putting part of your retirement assets into a fixed annuity can be a smart move.

It's variable annuities (and whole life insurance) that are often ripoffs.

[wincrasher]

Probably the nice man is getting a fat commission on the annuity. That is the usual case.

Don't invest in something you don't fully understand.

Beware of locking your money up as you are just entering retirement.

[Scanner]

Give all your money to me and I'll send you a monthly check.

I promise.

[sweeps]

Originally Posted by wincrasher

Beware of locking your money up as you are just entering retirement.

Sorry, but this is not sound advice. It can be a very good idea to "lock up" a portion of your retirement savings as a fixed annuity.

OP, can you provide more details? What kind of annuity is this? What are the commissions, fees, etc.

[GREENBACK]

Originally Posted by sweeps

What are the commissions, fees, etc.

I don't know a lot about annuities but I've always heard this not so apparent part of the agreement is the deal killer.

[creditcardfree]

Yes, check into the commissions and fees. You will most likely do better elsewhere.

[kork13]

I've made it policy for myself that anyone who comes to my door trying to sell me something (unless it's girl scout cookies--blast my sweet tooth ) will get the boot ASAP. In nearly all cases, they are not trying to do me a favor or get me a good deal... they're hoping to turn a quick buck. If what they're selling is so valuable, I can surely go out and find it myself, and probably do better for it.

[pgtr]

Life Insurance salesman have given a legitimate option of annuitizing a bad rep. BE CAREFUL HERE - strongly second the comment of NOT investing in something you don't understand above! Nor for that matter something being pushed by a "nice" salesman.

If you are interested in annuitizing part of your portfolio - seek out a legitimate annuity company. (e.g. a TIAA-CREF type organization)

But I also find the reference to your state teacher's retirement system curious - I wouldn't be surprised if that already functions something like a 'pension'...? If so what would you gain by annuitizing this?

Good luck

[sweeps]

Good point about the pension. If you get a pension, that can provide the fixed income portion of your retirement income.

A good, fixed annuity is a do-it-yourself fixed income stream for people who don't have a pension.

[wincrasher]

I'd beg to differ!

Often times these annuities will have a 5, 10 or 20 year lock-up on the money. Substantial penalties to exit, wiping out your returns or worse - actually loose money. What if you need a nursing home or big medical expense and you need that money? Then what?

That's something to consider if you are already 65.

You should be in the safest available investments at this point in life - not chasing the maximum returns.

[Goldy1]

Me and dh are in our 30's. We went to go pay and start up TERM life insurance the other day at a local branch. The rep started spewing about buying "whole life/permanent insurance" later on by converting the policy. I just nodded ok uh huh b/c whenever I hear those wrods I tune out b/c the hundred investment books I read said buy TERM only. I have read there do exist instances where whole life can be a good bet but not for a healthy 33 year old.

[simpletron]

so you want to give up a pension for a salesman's annuity. you're asking us to compare two things- one(pension) of which will have no informarion on, and the other we have minimum information.

why don't we see if the pension is a good deal or not before looking at a confusing annuity? if the pension is a good deal versus a hypothetically good or great annuity, why should you look at the annuity?

I'm most interested in the initial payout, the account value and how the payments grow(no growth, keep up with inflation, fixed rate of growth). things I somewhat interested are the age of your wife, happens when she dies, and fees for taking money out of the pension.

if you don't like to give out the exact values, then give everything as a percentage of account value.

[ksluis62]

I did some technology work for the annuity division of an insurance company a few years ago. The group manager told me that typical commissions were 6-10%. So if you invest $100k, up to $10k goes directly to the salesman. That's why the lock in is so long and penalties so steep. I could never be comfortable with an investment with this kind of inefficiency.

[Scanner]

I have yet to have a taker here for sending all of their money to me and me sending them a monthly check.

I don't see why. . .maybe I need to name myself something rock solid sounding. . .like First American International General Equity Debt or something. . .then you will all send me your money.

[GREENBACK]

Originally Posted by Scanner

I have yet to have a taker here for sending all of their money to me and me sending them a monthly check.

I don't see why. . .maybe I need to name myself something rock solid sounding. . .like First American International General Equity Debt or something. . .then you will all send me your money.

Your problem is that you haven't invited us to a free luncheon and seminar where you guarantee that the money we give you will never, ever be lost. When the market goes down we won't lose anything and we'll always earn 2% every month. If that's your angle then count me in Mr. Madof.

[nylchicago1]

I do not agree with a lot of the replies I currently work for New York Life and I have been saving people a tremendous amount of losses of their retirement money by rolling assets into fixed annuities. We also do offer guarantees on most of them with a min. of 3%. But again we are a very stable company I would not buy one from anyone but. We also offer products that do pay you for LifeTime.

[Bryan Anderson]

The answer is simple. I am sorry you haven't received a decent piece of advice yet.

Pensions rarely pay a lump sum that is equal to the size of the annual income on an actuarial basis. It's not always the case so you need to make some calculations before you decide.

At age 60, immediate annuities typically pay 7-8% of the invested amount annually for life. That payout rate increases with age. If that exceeds the amount of income you will give up by taking a partial lump sum then it is a wise move. Plus, you are earning interest and when you do use the money, your monthly payments will be even larger.

Now, let's calm the fears you may have about annuities after reading all this great advice everyone gave you.

*A 15 or 20 year lock-up (surrender) period is outrageous and it is very easy to find a contract that is ten years or less. Most good contracts are in the seven year ballpark.

*Terminal illness waiver- again, good contracts will waive all surrender charges in the event you face terminal illness, long term care or other medical hardships

*Also, companies are required by law to give limited access to the funds invested, usually 10% and sometimes higher without penalty.

*All annuity contracts can be turned into a stream of income after the first contract year without penalty.

*Don't worry about how much money the agent will make. As long as you stay away from annuities with long surrender schedules, then you don't have a problem.

The simple calculation as the top of the post is all you need to be concerned with for now. If the math points you toward an annuity, shop around. Any good agent won't be threatened by this. Even if it just confirms that your saleman showed you the best thing you can get then you'll at least sleep well knowing you got a good deal.

Good Luck

Bryan J. Anderson

[sweeps]

Originally Posted by Bryan Anderson

The answer is simple. I am sorry you haven't received a decent piece of advice yet....

OP, this is the kind of sales pitch you will face when shopping for annuities. Be very cautious.

[DebbieL]

Thank goodness Bryan came along with some decent advice finally (giggle). Work must be slow these days, lol.