Equity Index Annuity the best ?

[patch36]

I'm asking, more specifically, what size of bonus are you using and what is the guaranteed minimum interest? Say the bonus is 10% and the min. is 3%, on a 10 year product. The avg. would be 4%. This is much worse than a 10 year fixed annuity.

What does a 10 year fixed pay that you are referring to? You are simply adding up total interest for an average without consideration for the compounding affect of the initial 10% bonus?

You may be right, but I have to dig out a spreadsheet and figure it or look at the effective interest rates the companies post with the products. There are other considerations, but you bring up a good point.
- - - - - - - - - - - - - - - - - -
I dug out an old spreadsheet and assuming interest rates on the 10% bonus annuity remain static at 3% and straight fixed annuity at 5%, the fixed overtakes it at year 8.

 

[dannysdad]

What does a 10 year fixed pay that you are referring to? You are simply adding up total interest for an average without consideration for the compounding affect of the initial 10% bonus?

You may be right, but I have to dig out a spreadsheet and figure it or look at the effective interest rates the companies post with the products. There are other considerations, but you bring up a good point.

If you compound the hypo FIA, you get 4.8%. If you compound a 5.6% fixed annuity, you get a hair over 7%. I wish it were the other way around, as I would rather have the FIA commission.

 

[patch36]

Here's the thing about bonuses:

With most products (nearly all, as a matter of fact), if you leave before the contract period the bonus is lost. So, a bonus is fine if you stay for the long haul.

There are also products that take this even a step further: you have to take an income stream for some period, usually 10 years, or you lose the bonus.

I know a lot of you don't like Allianz, but at least with their latest product the 10% bonus vests at 1% per year. Since it is a 10 year product and the penalty is around 6% in the sixth year, I'm looking at this as having a 6 year walkaway if someone really hated it. The vested bonus and the penalty would be about the same in year 6.

So, in the past I haven't made a big deal about the bonuses because I always looked at bonuses as being icing on the cake.

That whole world is different because of the economy and because there are some decent products now with genuine bonuses.

What companies lose the bonus ? None that I deal with. And the companies I deal with pay full accumulation value on death if prior to maturity, and they pay the death benefit immediately, not over 5 years like many do.

Vesting a bonus? Why is that necessary if you sold the right product to begin with? I never put money into a long term annuity unless that money is not going to be touched except for the 10% annual penalty free withdrawals.

I don't deal with Allianz because of those kinds of things. The annuities I wrote with AVIVA (American Investors) paid full accumulated value on death. If you surrendered early you kept the bonus minus a surrender charge and MVA. The fixed also have similar surrender charges. Midland pays full accumulated value on death, including the bonus with no vesting nonsense.

What am I missing?
- - - - - - - - - - - - - - - - - -

If you compound the hypo FIA, you get 4.8%. If you compound a 5.6% fixed annuity, you get a hair over 7%. I wish it were the other way around, as I would rather have the FIA commission.

Understood, but the FIA's are paying a little over 3% which offsets that some. I do sell Fixed products, but shorter term 3 to 5 year stuff. I understand where you are going, but the conversation I was involved in had more to do with the Index option and whether it was important to me. The indexing does add another dimension and adds value, I just have difficulty convincing people to move to the index strategy in the uncertain economy we have had for the last few years.

If I lose the indexing option to the BD's, I will only be selling FA's, and probably without the bonus.

 

[dannysdad]

What companies lose the bonus ? None that I deal with. And the companies I deal with pay full accumulation value on death if prior to maturity, and they pay the death benefit immediately, not over 5 years like many do.

Vesting a bonus? Why is that necessary if you sold the right product to begin with? I never put money into a long term annuity unless that money is not going to be touched except for the 10% annual penalty free withdrawals.

I don't deal with Allianz because of those kinds of things. The annuities I wrote with AVIVA (American Investors) paid full accumulated value on death. If you surrendered early you kept the bonus minus a surrender charge and MVA. The fixed also have similar surrender charges. Midland pays full accumulated value on death, including the bonus with no vesting nonsense.

What am I missing?
- - - - - - - - - - - - - - - - - -


Understood, but the FIA's are paying a little over 3% which offsets that some. I do sell Fixed products, but shorter term 3 to 5 year stuff. I understand where you are going, but the conversation I was involved in had more to do with the Index option and whether it was important to me. The indexing does add another dimension and adds value, I just have difficulty convincing people to move to the index strategy in the uncertain economy we have had for the last few years.

If I lose the indexing option to the BD's, I will only be selling FA's, and probably without the bonus.

It appears that you understand that the fixed annuity is the better deal for the client, but, for some reason, you won't do it. Would that reason be the commission?

 

[patch36]

It isn't that simple. The conversation was about Indexing. In the case of most of my customers and the fact that they are unwilling to move to the Indexed Strategies, the pure fixed may have been best, but there are other factors. In hindsight, some of these customers MAY have been better served with a pure fixed annuity, but not in every case. In hindsight many of these customers would have been better served with a Single Premium Life Policy since they will never touch their money. Hindsight is great.

I have as many clients who have done better with the Bonus Annuity as they would have to this point with the Fixed. In the extreme longterm, and if they do not die or take out the money for Nursing Home or Terminal Illness, or ... yes, they might be better off mathematically with the Fixed Only Product. Remember, most of my clients are not Boomers, they are older. Many will not live the full term of the contract and the products I write pay an immediate death benefit, including the bonus and all of the interest. I write very few income annuities or annuities the client expect to outlive. Unlike the Allianz products, the ones I sell pay full accumulated value immediately upon death and have penalty free withdrawals of 10% a year, nursing home and terminal illness waivers, ect...

You seem to want to paint me as commission driven without concern for the customer? Perhaps you are judgemental without knowing all the facts about my clients and my ethics? I understand your conclusion and opinion, but there is more to the story, and I pride myself on what I have done for my clients.

 

[dannysdad]

It isn't that simple. The conversation was about Indexing. In the case of most of my customers and the fact that they are unwilling to move to the Indexed Strategies, the pure fixed may have been best, but there are other factors. In hindsight, some of these customers MAY have been better served with a pure fixed annuity, but not in every case. In hindsight many of these customers would have been better served with a Single Premium Life Policy since they will never touch their money. Hindsight is great.

I have as many clients who have done better with the Bonus Annuity as they would have to this point with the Fixed. In the extreme longterm, and if they do not die or take out the money for Nursing Home or Terminal Illness, or ... yes, they might be better off mathematically with the Fixed Only Product. Remember, most of my clients are not Boomers, they are older. Many will not live the full term of the contract and the products I write pay an immediate death benefit, including the bonus and all of the interest. I write very few income annuities or annuities the client expect to outlive. Unlike the Allianz products, the ones I sell pay full accumulated value immediately upon death and have penalty free withdrawals of 10% a year, nursing home and terminal illness waivers, ect...

You seem to want to paint me as commission driven without concern for the customer? Perhaps you are judgemental without knowing all the facts about my clients and my ethics? I understand your conclusion and opinion, but there is more to the story, and I pride myself on what I have done for my clients.

I love commissions and I'm in business to make money. I know you can be commission driven and concerned for the customer, at the same time. In your case, I think you step over the line. You are misleading people about what to do with their money. Do you let them know that if they do "indexing", they will have ZERO money in the stock market? Do you explain to them that they will make more money in a fixed annuity? How would you explain yourself in open court? Aren't you afraid that someone like me will meet your client and explain what you have done? You should be.

Guys like you are the reason that the regulators use to justify making these things securities. Nice job.

 

[Paradigm]

Fixed Annuities are saving vehicles not investment vehicles.

They can be indexed to the market indexes to allow you to return a greater interest rate potentially than a fixed product like a CD could.

They are not investments.

The definition of an investment is a vehicle where your money is placed at risk to potentially gain greater than average returns. There is also the potential that you could lose your money.

In a fixed annuity there is no risk hence it is not an investment.

 

[Guest]

Guys like you are the reason that the regulators use to justify making these things securities. Nice job.

It's nice to see "dannysdad" beating the crap out of someone other than me for a change. Patch36, he's all yours now.

He wants me to commit suicide. Lord knows what he will want you to do! If nothing else, I'm sure he will report you to your DOI. It's what he does.

Good luck with him. You will need it! Actually, just get a good lawyer and let the law firm deal with him in their own good time. That's what I'm doing. It might work for you as well... and anyone else that this miscreant turns his sights on.

I'm hoping he'll beat up on stibroker (Scott Thilgen). I can't wait to see the graphics he comes up with here! (Try the link. Hell of a good song! Wonder who does it. Anyone know?)

Al

 

[patch36]

I love commissions and I'm in business to make money. I know you can be commission driven and concerned for the customer, at the same time. In your case, I think you step over the line. You are misleading people about what to do with their money. Do you let them know that if they do "indexing", they will have ZERO money in the stock market? Do you explain to them that they will make more money in a fixed annuity? How would you explain yourself in open court? Aren't you afraid that someone like me will meet your client and explain what you have done? You should be.

Guys like you are the reason that the regulators use to justify making these things securities. Nice job.

You certainly put yourself on a pedestal. You have no idea how I conduct business and what I have told my customers. You have ascertained I am a liar, thief and scoundrel from a simple conversation. You assume that there is no place for the products I sell and that you are the only one entitled to an opinion. Billions of dollars are sold each year in the same products I choose to sell. I explained why they are suitable to those I sell them to and I also explained that I sell a variety of annuities. This particular discussion was about FIA's which you obviously think are not a good product. We disagree, but you could not contain yourself without making your typical personal attacks.


As I said, I meet with all of my clients each year and explain the Indexing Strategies and the choices they have. Because of their fear of the markets and economic uncertainty they generally choose to remain in the Fixed Account. I don't know how to explain it to you so you understand that I do educate my customers, but their choice is typically not to move out of the Fixed Account. Am I doing a poor job by not trying to get them to move into a Fixed Strategy? It is my job to inform them, not coerce them, but they understand they have the choice which is something they do not have in a Fixed Interest Only Annuity.

I sincerely doubt any of my customers would choose to work with or trust an arrogant and pompous ass such as yourself, but give it a shot if you would like.
- - - - - - - - - - - - - - - - - -

Fixed Annuities are saving vehicles not investment vehicles.

They can be indexed to the market indexes to allow you to return a greater interest rate potentially than a fixed product like a CD could.

They are not investments.

The definition of an investment is a vehicle where your money is placed at risk to potentially gain greater than average returns. There is also the potential that you could lose your money.

In a fixed annuity there is no risk hence it is not an investment.

Exactly P. FIA's offer strategic choices, FA's, don't, but at the end of the day they are a Savings Vehicle, not an investment.

 

[padthaiforlunch]

If you compound the hypo FIA, you get 4.8%. If you compound a 5.6% fixed annuity, you get a hair over 7%. I wish it were the other way around, as I would rather have the FIA commission.

Which fixed product has over 7% for ten years?