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[LostDollar]

Lets attempt to settle/explain this.

I believe this is what people are somewhat saying when thinking about this topic......but maybe not. Not saying this is the thought, but I think this is why there is a debate here as to whether 1 day a year ends up being equal to 12 months.

Here is comparison of the last 12 months had someone had 100% in an index product with 0% floor, 9% cap & 100% participation rate. $120,000 from 1 day last year to 1 day this year compared to having $10,000 each month having 1 day, so therefore 12 days. A person doing this the last 12 months would be substantially better, having been able to make almost 4% instead of a 13% loss (0% credited)

PS-- reminds me of how I would love to find a way to start dollar cost averaging back in the market right now on a daily incremental basis, but most places I find only allow it to be set up on a monthly basis & who wants to guess at mutual fund/ETF value on 21 different days a month?

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Hey Allen, you are giving me credit for a lot of Annuity Technical Knowledge, Mathematical Knowledge, and Financial Theory Knowledge I do not possess.

scagent and I are talking past each other.

One reason is that back at the beginning of the thread when I made the comment about monthly crediting options, I did not even understand that there are at least 2 different monthly crediting computations and it looks like I have posted links to both of them at various points through the thread. So, a person reading the thread is not going to know what was in my mind when I said Monthly Crediting.

A second reason is that (I believe) scagent wants me to agree that Monthly Point to Point and Annual Point to Point are based on the same numbers and he uses whole number computations to demonstrate this. I agree with his math, but I do not agree with applying it to Annual Point to Point and Monthly Point to Point and to some company's definitions of Monthly Average because the companies use percentage values for those computations.

scagents whole number math does not work for percentage math.

Let's take a string of 5 numbers: 16, 20 14, 25, 28.
For convenience we'll say those numbers represent a value at the end of 5 periods called months. 5 months = the big period.

The overall change for 5 months is 28 - 16 = 12
The periodic changes for 5 months are 4, -6, 11, 5. These sum to 12.
This is the demonstration scagent is making.

However the indexes convert these whole number computations to percentage based computations. (We'll ignore the concept of caps to just focus on percent math)

The percentage change for the big period is (28-16)/16 = 75% (conceptually Annual P2P)

The percentage changes for the months are:
4/16= 25%; -6/20 = -30%; 11/14 = 78.6% 3/25 = 12%.
The percentage changes for the months sum to:
25.0%-30.0%+78.6%+12.0%=85.6%

When you use whole numbers, the sum of monthly changes = the big period change of 12.

When you use percents, the sum of monthly changes 85.6% does not = the big period percentage change of 75%.

Although I don't understand the math and financial theory involved, I extend from that to say that percentage based Annual Point to Point computations based on two points will yield different indexing results from percentage based Monthly Point to Point computations based on 13 points. (And probably Monthly Average computations based on the average of a sum of percents will yield different indexing results from Monthly Average whole number computations based on the average of 12 month end index values.

 

[LostDollar]

I am guessing he is talking more like how IUL has 12 different buckets each year if you paid annual or dollar cost averaged compared to all the money being in 1 single bucket. IE: 100% of money having only 2 dates per year to compared the index starting & ending compared to 8.3% of the money each having 2 dates, thus 12 index checkpoints per year with 1/12th of the money. Ala, a bit of dollar cost averaging

Again, you credit me with a lot of acumen and financial theory I do not possess.
(and I may be using the term "crediting" improperly in the following comments-if so I don't know the right other word to use. I do understand there is no finalization or lock until the end of a 12 month period.)

My simplistic thinking approach:

Since it's all ball bearings, let's talk about my Timken stock.

I bought Timken on 1/25/22 at $68.7950 per share. (the online pundits assured me it was going to go up.)

For some future time there could be 1 of 3 results. The price could go up, it could remain the same, or it could go down. Up could be good or could be bad depending on your investment approach. Down could be good or could be bad depending on your investment approach. No change could be good if you are happy with the dividend return.

Extend this to the S&P 500. There could be 1 annual change converted to percent or there could be 12 monthly changes converted to percent. (remember some plans have an inverse trigger option.) The "goodness" or "badness" of a positive, zero, or negative change will depend on your investment approach.

Think attaining or avoiding.

For most of the FIA's I was looking at I wanted to attain a positive result or avoid a negative result. With an annual point to point method I had 1 chance, based on two points to get the positive or negative result. I expected the result would be negative. (Back in Jan-Feb when I was looking at FIA, a good portion of the pundits were projecting an S&P500 decline.)

So, in an environment where S&P500 is going up and down enter a monthly strategy. It gives me 12 opportunities to catch upswings and avoid dramatic downswings. Of course Tahoe Ray's objection is also true, it gives me 12 opportunities to miss upswings and catch dramatic downswings.

No sophisticated financial theory here, just a simplistic view and opinion. Hope that's helpful to you in understanding my viewpoint.

 

[scagnt83]

A second reason is that (I believe) scagent wants me to agree that Monthly Point to Point and Annual Point to Point are based on the same numbers and he uses whole number computations to demonstrate this.

They are based on the same numbers. Its the same 12 months. Same starting point.

They use a different calculation to regulate gains. That is the only difference.

 

[scagnt83]

I extend from that to say that percentage based Annual Point to Point computations based on two points will yield different indexing results from percentage based Monthly Point to Point computations based on 13 points. (And probably Monthly Average computations based on the average of a sum of percents will yield different indexing results from Monthly Average whole number computations based on the average of 12 month end index values.

Technically annual p2p is based on 13 points as well.

Beginning value + 12 monthly end points.

 

[scagnt83]

scagents whole number math does not work for percentage math.

Let's take a string of 5 numbers: 16, 20 14, 25, 28.
For convenience we'll say those numbers represent a value at the end of 5 periods called months. 5 months = the big period.

The overall change for 5 months is 28 - 16 = 12
The periodic changes for 5 months are 4, -6, 11, 5. These sum to 12.
This is the demonstration scagent is making.

However the indexes convert these whole number computations to percentage based computations. (We'll ignore the concept of caps to just focus on percent math)

The percentage change for the big period is (28-16)/16 = 75% (conceptually Annual P2P)

Your math is not correct, because you did not start with a beginning value as a stock index does.

I used the number 100 specifically so that you could easily see that the %s work out as well.

Your example above either has no starting value, or 16 is the starting value and its only 4 months of returns.

 

[LostDollar]

I would go to whoever you bank with. You'll have an agent/advisor still but some banks have special products that aren't distributed through normal channels from a few major carriers.

Most online websites do not show every annuity available. Agents customize which annuities to show on those sites.

And just because they dont list it, doesnt mean they cant/wont sell it. Just ask.

I started that process (checking with online agents) last week. As I tried to indicate above, the first one never directly answered my question, just came back with his agency's process of a minimum $20K purchase so he couldn't help me.

I have a second inquiry out which i hope to hear back on today or tomorrow. I expect that answer to be no too.

At that point I believe Tahoe Ray's suggestion will be the ticket. Historically when I have seen those guys pop up on a credit union dashboard, I have ignored them because I have had no money for that level of savings. More recently after whatever that law change was that allowed "old farts" to do IRA deposits, I have ignored them because I have been hard pressed to deal with the basic issue of HSA and IRA deposits from discretionary cash flow. So, based on funds availability and fear, I had totally removed from memory the idea that a credit union (or bank) might be a source of an investment advisor or annuity sales person.

I have more credit union memberships than dental insurance policies. When I checked I found one that actually had wealth management listed as a service on their consumer dashboard. That takes me to an agent's name and email address. The (local) credit union advising relationship should take care of low commission, low purchase amount issues. If I need to email him about a $5K Athene 5YR MYG MVA, I expect a yes answer and I hope we can even do the app over the phone rather than having to schedule in office meetings at one of the credit union branches.

 

[LostDollar]

His point still stands. The majority of monthly crediting strategies underperform annual p2p, based on historical (and actual) policy data.

Largely, because one bad month can erase all of those "capped" monthly returns that you had in the previous months. The market it volatile...so if you get capped in 3 good months you miss a lot of the return. In the 4th month, it sells off (which is typical), you can give back most of those gains and have to essentially start over.

Unless the market goes up every month, and never a lot in one particular month, mp2p is just not as strong as ap2p.

That's what scagnt83 means when he said you're still at the mercy of two market points. It ends up the same either way, except the annual p2p have caps structured to capture more gain whereas the monthly do not.

A lot of carriers used to have monthly (to my recollection) but once the agents figured out they weren't as good, they dropped them. They are also a lot more challenging to explain to the consumer.

If you want something very safe/foolproof, just buy a MYGA. American National has a 3.95% 5 year rate, is A rated, and has been in business over 100 years.

Thank you for the suggestion. It looks like American National purchase price drops to $5K just like the Athene MYG MVA. It also looks like I could buy a $5K American National product on the Blueprint online website. However, following your suggestion somewhere in another post that went something like "whatever meets your needs", I think the Athene product is better for me because its return is over 4% and it has a flexible premium. (I see at the current time the American National product also has an over 4% return, but the flexible premium difference still exists.)

Surrender charges also appear to be different, American National having a 10 year surrender charge period on the 5 yr product, where Athene's surrender charge period is just 5 years. If I say I am approaching the end of my own personal accumulation period, but (barring any significant health difficulties) believe I can hold the product for a full 5 years, I am not sure that difference has any significance for me, but it does exist.

 

[Tahoe Ray]

Surrender charges also appear to be different, American National having a 10 year surrender charge period on the 5 yr product, where Athene's surrender charge period is just 5 years.

You have a 30 day window to move to another annuity after the 5 year guarantee period is up with ANICO (American National) that waives the surrender.

Just FYI.

 

[goillini52]

You have a 30 day window to move to another annuity after the 5 year guarantee period is up with ANICO (American National) that waives the surrender.

Just FYI.

Isn't that true with all of them?

 

[Tahoe Ray]

Isn't that true with all of them?

ANICO is unique because they have a 10 year surrender on a 5 year guarantee (and 3, 7 etc.). You may have an automatic roll on a true 5 year product (into a new surrender period at current rates) but some MYGAs won't roll you at all into a new product.

You won't have a surrender penalty in those cases anymore but you'll likely see a large decrease in your rate so most consumers move it anyway unless they need the money asap.

It really depends on the carrier.