Annuities
The *right* annuity can be great. Nine years ago I purchased Allianz 360. It has netted 5.3% a year. It has a 1.1% fee (so it grossed 6.4% a year). It cannot go down when the market goes down, but it goes up if the index it is linked to goes up (and the index will go up if "the market" is up). I can begin payments at any time - if I begin payments in September I get 7.36% of $250,000 for life (I'm now 66) - so about $18,400 each year - off a $150,000 original investment.
I've been very happy but I know I was very fortunate. There are many bad products out there.
Yes, the salesman makes around 7% commission on these products. Invest 100K, the salesman gets 7K.
It takes a great deal of financial knowledge to understand whether you are getting a good annuity or not. An average person is not likely to possess such knowledge.
Main drawback: Difficult to identify a good annuity.
Main plus: Safety, many years of high payments when the market may go bad.
Safety: No annuity has failed to pay in 150 years of the insurance industry - they are insurance.T he state pays if the company goes bad.
Warning: Do not take a "variable annuity". All are very high fee with danger from market volatility. The only purpose of this type of annuity is if you want to put more in a 401K than tax law allows, these are an alternative (but again high fee) vehicle.
|