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Originally Posted by jabacon6669
My financial advisor several years ago told me to put my money in annuities. I can select my own strategies at the beginning of each portfolio year. For example: My portfolio renews in March. My strategies I selected 1. 20% declared (fixed) rate - 3.2%. 2. 40% Gold 1year Point to point. capped @7.75%, if gold goes down you loose zero. 3. S&P500 1year Point to Point capped 6.1%, if S&P goes down you loose zero. Other choices are, Real Estate 1year Point to Point 8.7%. they're are a couple of other choices with less risk that pay around 2.3%. Bottom line, market goes up you make money. Market goes down you don't loose. As a retiree this appears to me to be a safe and secure investment plan. I am with Great American Life Ins. Co. They just this past month got bought out by Mass Mutual. No changes to my two contracts.
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A typical sales commission for selling an annuity is about 10 percent of the contract amount. They can pay such high commissions because there is usually a 7 to 10 year surrender fee for selling early. Also, the annual fees to the insurance company are much higher than other investments, and these fees are added on to the internal fund management fees. When they say you can't lose money, they are only referring to the market fluctuations, not the fees. So, the money you get back can be less than what you invested, but they will claim that you didn't actually lose money, you just had to pay the fees. But, my main complaint with annuities is that, it is a contract with an insurance company that is typically more than 100 pages, and they will not allow you to read it before you sign it. To me, that is a non-starter.
You will almost always make more money by investing your money in the same products within a mutual fund instead of an annuity. And, another thing that you need to consider is that any money you do make with an annuity will be taxed at your ordinary income tax rate. So, if you have capital gains, you don't get the tax advantage of a lower income tax rate like you do with mutual funds or other investment products.