The whole annuity business stinks

Jul 2, 2019

  1. Tahoe Ray
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    True. And may hold a lot of other instruments.

    @entrep1776 All of this can normally be found in the carrier's annual report under the corporate section where they discuss the general account.
     
  2. Allen Trent
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    exactly. I am guessing the most solid carriers miss out on a lot of commercial mortgages because they wont loan on new start up businesses, they require personal guarantees from the borrower & only loan up to 70% of property value. the lower rated or more aggressive carriers may be trying to be aggressive on new projects, no personal guarantee or larger loan to value ratio to attempt to get a higher interest rate charged to the lender & thus it becomes a riskier portfolio. same could be true that they have a higher % of junk or near junk bonds.

    Consistently higher crediting rates on a MYGA annuity and/or higher commission rates has to be coming from some place or require everything to play out to near perfection to work long term
     
  3. entrep1776
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    Couldn't annuity buyers, buy a financial product? Like bonds or real estate investments through stock market that would maybe pay them better?

    I don't think I would buy an annuity after seeing this. So I wouldn't sell them either.
     
  4. DHK
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    Only annuities provide mortality or longevity credits.

     
    DHK, Jul 25, 2019
    #14
  5. entrep1776
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    Watched 2:02 to 2:20 he talks about payments going to spouse or family. This pretty much takes out longevity credit? No longer a bonus for someone dying in the pool
     
  6. entrep1776
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    Seems like best bet is term life insurance which is straight up a longevity credit instead of mixing investments with longevity
     
  7. DHK
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    It's priced into the payment structure. The less guarantees, the higher the income. The higher the guarantees and/or the longer the payments are to last, the lower the income.
     
    DHK, Jul 25, 2019
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  8. DHK
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    Since terminating coverage is actuarily designed to expire before we do, I would suggest that it doesn't have ANY "longevity" credits.
     
    DHK, Jul 25, 2019
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  9. entrep1776
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    So taki
    Taking the 5 grandma example, each put in $100. Then they each put in another $100 to invest somehow. Then they pay 10% bonus to their agent immediately & of course insurance company makes some money & agent makes some more money over time.... & then they say each of their families gets their $100 i mean $90-expenses..... So really nothing involving getting any of the other dead grandma's money at all?

    How would say to structure the 5 grandma scenario above & in the video?
     
  10. DHK
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    The "grandma" example applies primarily for SPIAs. After the money is gone, the income still continues. Why? Because SOME die and some keep living. Those that pass away, their lump sums are surrendered to the insurance company as it's a "life only" payout.

    But even for LIBRs, once they've ran out of money, they still didn't run out of income.

    Now, if that person didn't like that idea, then do a split between the SPIA and a SPWL policy. Life a long time, and you can still get the income and the liquidity from the SPWL. If you pass away too soon, the beneficiaries still get the DB of the SPWL.
     
    DHK, Jul 25, 2019
    #20
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