38 yr Old Wants Fixed Indexed Annuity

[DHK]

You have a lot of opinions and advice for someone whom you did not do a fact-finder with. All you have is their age and size of portfolio and you're ready to preach about the need for equities. I am glad to see that you know how to use your HP-12c financial calculator to do FV calculations.

Show me any real life investment that compounds at 4%, 7%, or 8% each year AND would have reasonable assurance that that value would actually materialize and be there if and when he needs it at any point along the way? You cannot make that statement - because of securities volatility.

Average returns are not the same as actual annual returns.

Plus, you do not know his attitudes and concerns towards social security, and, if he can find a continuously renewing or growing lifetime income benefit rider for longer than 10 years... he could be securing a future guaranteed lifetime income for himself. Sort of a "Set it and forget it" strategy (although no one would recommend forgetting it).

In addition, if he owns his own annuities AND he wants to begin SELLING annuities, then having one of his own and his own statements would be helpful for him. Obviously, this isn't client-specific advice, but business/sales advice... but it IS a considerable factor for an agent.

 

[DHK]

As a side note, here's what one investment advisor said on another forum regarding a lifetime income benefit rider on a VA that's no longer available:

That being said, if the original HD7 rider was available today, I would dump my entire SEP in it. Income base is 200% after 10 years, 400% after 20, and 600% after 25 years. Income is 5% for life at 59.5, joint or single (single was 40 bps, joint was 60 bps).

Do the math. That's $30K in income for life for every $100k you give them at age 35. Not a bad little pension that isn't technically annuitized.

That's long gone (and it was gone before I entered the biz).

Just to be up front, I am going to buy an annuity myself at some point, as I have no pension. I may buy a FIA with a long roll up and pretend it's annuitized (because it will be for all intents & purposes). Or I may buy an actual deferred income annuity or a SPIA at retirement.

I'd like to see what the deferred income annuity rates do once interest rates normalize (or better yet, spike).

Oh, and he's 37.

Just an additional perspective to consider.

 

[junkman]

Yeah, someone walks in and says "I want an annuity for my qualified money " and the insurance agents are pulling out the app and saying "buy this".

Calculate the rolling 10, 15, or 25 yr compound return of the S&P then explain how the current rates and safety help with his already qualified money. Be sure to include the dividends which indexed annuities miss. Annuities have no place for this money .

Opinions are like butt cheeks. You're entitled to yours.

 

[jboussea]

Yeah, someone walks in and says "I want an annuity for my qualified money " and the insurance agents are pulling out the app and saying "buy this".

Calculate the rolling 10, 15, or 25 yr compound return of the S&P then explain how the current rates and safety help with his already qualified money. It doesn't.

Opinions are like butt cheeks. You're entitled to yours.

Of course the return on the S&P would be higher the vast majority of the time

..but why are you talking about returns when the guy clearly says "i'm more conservative in what I want to invest in" .. so it sounds like the OP already knows that.

I"m sure many of the agents here do not buy indexed annuity in their 30's .. but this person clearly does not want the bulk of his money in stocks.

 

[DHK]

Calculate the rolling 10, 15, or 25 yr compound return of the S&P then explain how the current rates and safety help with his already qualified money. Be sure to include the dividends which indexed annuities miss. Annuities have no place for this money .

Dividends would not be the issue. Volatility and risk would be. At least today, you have ETFs to make investing in a mirrored indexing strategy affordable... because you (obviously) know that you cannot invest DIRECTLY in an index.

I already debunked Warren Buffett's poor investment advice (yeah, I know that's sacreligious, but I did it anyway).

David H. Kinder, ChFC - Insurance, Financial, and Retirement Planning

And I'm not the only one.


Respect someone's desire to be conservative. After all, that's what FINRA discovered as well.

http://www.usfinancialcapability.org/downloads/NFCS_2015_Report_Natl_Findings.pdf

However, despite the numbers and demographic research... you are still giving your (unsolicited) opinion to someone who did not request it, NOR did you complete a fact-find to determine their risk tolerance.

You are actually trying to TALK HIM INTO A HIGHER RISK TOLERANCE! I'm sure you don't do that with your clients in real life. (See page 18 of that link of the FINRA financial capability study, but compare to the 2012 and 2008 study and you'll see that as the economy grew... people are suddenly more willing to "take risks".)

If you were an investment advisor, that would be grounds for a complaint... and they would win.

 

[DHK]

Then there's this blog post I wrote based on another consultant's article:

David H. Kinder, ChFC - Insurance, Financial, and Retirement Planning

 

[junkman]

You win. Go sell him the annuity and lock in the lower than inflation returns for the next xxx years. He didn't approach this as an educational project so just let him have what he thinks he wants and collect some cash.

Of course he can't directly buy into an index. My original instructions were to become educated and I sent him to a reading list. If $200,000 isn't enough to justify tackling the learning curve so be it. Pay a competent advisor and give up 1% or more and live with the differencein accumulation. A 1% lower return only amounts to $250,000 over the next 25 years. I'm sure the professional advice snd safety will be worth it.

 

[DHK]

Vanguard thinks so.

https://www.vanguard.com/pdf/ISGQVAA.pdf

 

[junkman]

There is no alpha. It's a mirage. No beta either. Also a mirage but useful for understanding. Minor changes in inputs result in major outputs (ie portfolio composition).

Investor pays his money and takes his chances. No do overs.

 

[DHK]

Very true, but portfolio construction isn't everything that an advisor does for their clients.

In fact, if ALL you want is portfolio management, don't bother with an advisor. Do it yourself or get a robo-advisor... which is what I'm sure you would recommend.