Annuity Recomendation

[0b1kanobee]

I didn't read the entire thread but it seems that most people missed the fact that a rollup rate is meaningless without also knowing the allowed withdrawal rate.

I agree. That's one thing I can't stand when I read the marketing but such is marketing. Remember too that usually the withdraw rate is effected by the age of the annuitant.

Another thing to consider is that the withdraw rate or payout which is the highest is not always the best when considering a FIA. That money has to come from somewhere otherwise known as your account value. The larger the money coming out is the quicker your account value falls (usually). If that is not a consideration, then well..........it isn't but it's something to consider.

 

[briko3]

I didn't read the entire thread but it seems that most people missed the fact that a rollup rate is meaningless without also knowing the allowed withdrawal rate.

That's a very good point. I don't want to get in to details because of time, but there is a company we use that has a lower rollup rate, but in cases where the client doesn't want to withdraw immediately, the income generated is a lot higher than other companies with a higher rollup rate. Obviously joint payouts can also make a difference.

It's a good wedge when you show the 'sizzle' another agent has shown with a high rollup compared to a higher income with the lower rollup product.

 

[nathan.lee]

One thing I learned very early on in my career was to not get into an argument about product.

Advisors, agents, and investors are all very passionate about the various "products" they represent or in which they are invested as we've seen by the divergent path and length of this particular thread.

At the end of the day, I'm sure we can all make valid points as to why certain investment strategies or vehicles can/will outperform others in certain scenarios. And there is the crux of the issue..."certain scenarios." Each and every client brings a unique set of challenges, goals, and needs that we must address and for which we must attempt to find solutions. Some days that solution may be a laddered bond strategy or it may be an FIA with an Income rider or maybe even a classic car that one hopes will appreciate in value.

So, the "My Dad is stronger than your Dad" argument that has been raging for the last 5-6 pages has achieved what? A few extra posts for some people? A platform to espouse one's knowledge? A real solution for the thread starter's question?

P.S. My Dad IS stronger than your Dad!

TGIF

 

[VolAgent]

That's a very good point. I don't want to get in to details because of time, but there is a company we use that has a lower rollup rate, but in cases where the client doesn't want to withdraw immediately, the income generated is a lot higher than other companies with a higher rollup rate. Obviously joint payouts can also make a difference.

It's a good wedge when you show the 'sizzle' another agent has shown with a high rollup compared to a higher income with the lower rollup product.

If I had twenty years to retirement, I wouldn't buy a rollup rate at all. Odds are good you'll move products at least once before then. Why pay fees for something you are almost certain to never use. Now, when it gets within a few years of retirement, then go for the rollup product. And yes, look at payout as well in deciding.

 

[Norwayguy]

If I had twenty years to retirement, I wouldn't buy a rollup rate at all. Odds are good you'll move products at least once before then. Why pay fees for something you are almost certain to never use. Now, when it gets within a few years of retirement, then go for the rollup product. And yes, look at payout as well in deciding.

I agree totally...I have only 1 time recommended a rollup rider for someone with 20 years to retirement...In her case the money was comig from a pension and the rider guaranteed her a better income benefit than the existing pension. The only what if was if the account value outpaced the rider value (unlikely).

 

[dgoldenz]

To an extent, but withdrawal rates are fairly standardized throughout the industry.

Sure, there are some lower and some higher; but you can figure 4%ish when in your 60s.

My point is that the crediting rate is meaningless and mostly marketing fluff. The only thing that matters is the amount of guaranteed income. A company could offer 10% guaranteed compounded, but if they only allow a withdrawal of 0.5% per year, the amount they can actually withdraw could be the same as 6% crediting with 5% withdrawal rate. I didn't run the actual numbers but you know what I mean.

 

[0b1kanobee]

My point is that the crediting rate is meaningless

I wouldn't go so far to say it is meaningless. It is just as important as the withdraw percentage. Those two numbers give you your income amount.

If your roll-up was 5% and your payout was 5% say at age 60 on one product and on another the roll-up was 8% and your payout was 5% at age 60, which one has the higher payout?

Both numbers must be taken into consideration when looking at the highest payout. Both have meaning.

 

[scagnt83]

Odds are good you'll move products at least once before then. Why pay fees for something you are almost certain to never use. Now, when it gets within a few years of retirement, then go for the rollup product. And yes, look at payout as well in deciding.

Ok. Not that I totally disagree, but think about this; if a 45yo who plans to retire at 65, waits until 60 to get an Income Rider, what will their Payout % be for age 65 by that time?

Right now a 65yo is around 5% give or take.

But with rising longevity do you think it will still be at that %?

If this is retirement money and we are assuming a not overly aggressive portfolio allocation, what do you think the chances of them gaining over 8% annually would be?


Even assuming the same accumulation rate, chances are the payout % will be less in 20 years for new $....


Also,
What do you think the main reason would be for them to move the $? Most likely an agent (new or existing) recommends that they do.

Think about what payout % the income rider would be at 4 or 5 years out... think about how many actually make 7% and 8% after fees in the market.

What is that 45 year olds chances of beating 7%-8% accumulation and 5% payout for life?
- - - - - - - - - - - - - - - - - -

My point is that the crediting rate is meaningless and mostly marketing fluff. The only thing that matters is the amount of guaranteed income. A company could offer 10% guaranteed compounded, but if they only allow a withdrawal of 0.5% per year, the amount they can actually withdraw could be the same as 6% crediting with 5% withdrawal rate. I didn't run the actual numbers but you know what I mean.

I hear what your saying.

 

[bobson]

One thing I learned very early on in my career was to not get into an argument about product.

Advisors, agents, and investors are all very passionate about the various "products" they represent or in which they are invested as we've seen by the divergent path and length of this particular thread.

At the end of the day, I'm sure we can all make valid points as to why certain investment strategies or vehicles can/will outperform others in certain scenarios. And there is the crux of the issue..."certain scenarios." Each and every client brings a unique set of challenges, goals, and needs that we must address and for which we must attempt to find solutions. Some days that solution may be a laddered bond strategy or it may be an FIA with an Income rider or maybe even a classic car that one hopes will appreciate in value.

So, the "My Dad is stronger than your Dad" argument that has been raging for the last 5-6 pages has achieved what? A few extra posts for some people? A platform to espouse one's knowledge? A real solution for the thread starter's question?

P.S. My Dad IS stronger than your Dad!

TGIF

Good post.

And we wonder why we are in such a mess with our personal finances. I've read these pages and half of the stuff people are talking about I don't understand. There is a lot of 'trust me' factor in investing. One must be very sofisticated to invest money. Saving money though is much easier. Most American's don't do either. And in my opinion people need to become better savers long before they should ever think about concering themselves with tbills, or puts and calls or dividend producing stocks or corporate bonds or junk bonds most of the stuff we've written about.

I'll take my single and not worry about any of it.

 

[njh_lfg]

If your income payment at age 65 was enough to cover your expenses and we go through a high inflation period at age 80 do you go back to work to make-up your missing income or sue your insurance agent/carrier?

Majority of AGENTS do not take this (inflation) into consideration and once they SELL the annuity to the client they disappear and never service it. I see it at least once a week!