Annuity
 

Catholic Holy Family Society (618)233-0286. A fraternal benefit society in Belleville IL. Buy annuity direct. NO commissions. Over 100 year old company

Whatever you do do NOT buy an annuity from VALIC.

This is the best advice if you must buy an annuity.

VALIC must be one of the worst insurance companies that does business in the USA. The fees they charged on a basic 403-B7 retirement account were felonious in the 1980's. Maybe they are better now? Unlikely.

I got a copy of my annuity the day after I asked. It was like 150 pages long. I read the whole thing. I do contracts for a living, and I have to tell you, there was a lot in there that could be a bit confusing, but overall it was fine and said what I expected. I was specifically interested in the income gaurantees, and it was clearly stated how they worked. If they won't give you the contract, don't sign up.

That is totally incorrect. You are not betting anything with the insurance company. This is like saying you are betting the insurance company you won't crash when you buy car insurance. Annuities are based on life expectancy averages. If anything you are bettting all the other people buying the same annuity contract that you will live longer than the AVERAGE life expectancy. They are called mortality credits... the people who die early pay for the people who die later. Basically the opposite of life insurance.

Basically - they are longevity insurance, and insurance costs money. They are NOT investments. So you are wrong twice.

There are horrible mutual funds out there but you don't condemn all mutual funds do you? Why would you condemn a tool that helps a lot of people because there are a few bad ones, and a lot of bad sales people? Just stupid.

On top of it, having gauranteed income makes you happier and live longer - and here is my reference, unlike your unsubstantiated claims.

Retirees with a Guaranteed Income Are Happier, Live Longer | Kiplinger

Annuities can be part of a solid retirement plan, people should take an unbiased look - and I have never sold one, I just own a few as part of mine, and happy I do.

Did you get the annuity contract before or after you provided the money? I have discussed annuities in great detail with several annuity salespeople, and every one of them told me that they will not allow a potential customer to read the contract until after they have invested in it. You pay the money first, then you get the contract to sign, and then you have 30 days to cancel the contract and request a refund. When I have told them that I would like to review the contract to advise a friend before investing, they get angry, and will not discuss anything further. I could never recommend that someone transfer a large amount of money into an investment contract without being able to review the contract in advance. I am just curious if that is the way you purchased an annuity or was the process different.

Thanks for stating my exact thoughts. What did you CFP tell you to do?

I think everyone knows that a CD is a type of contract issued by banks or brokers. An annuity is a type of contract with an insurance companies. Both are regulated. Annuities are regulated by the state insurance commissioner in each state.

There are many flavors of annuities. One types is very similar to a certificate of deposit (CD). This is called a Multiyear Guaranteed Annuity or MYGA. I think this type is a valid consideration as a CD replacement.

Key points:
CD's are backed by the FDIC up to $250k per person per account.
MYGA's are not backed by the FDIC. Since annuities are regulated by the states, MYGA's are backed by the "State Guarantee Fund" of each state. In Florida, this guarantee is $250,000 per person per account. The Guarantee Fund is funded (this is a legal requirement) by the insurance companies registered to do business in Florida.

A MYGA is a type of fixed annuity that provides a pre-determined and contractually guaranteed interest rate for a specified period of time, most commonly 3-10 years.

It's easiest to understand if I give an example:

Fidelity is currently offering a 5 year MYGA from Massachusetts Mutual Life that pays 1.9%. During the 5 years your interest accrues tax deferred. Taxes on interest are not due until you withdraw your money.

At the end of 5 years you are entitled to withdraw the entire principle plus interest in one lump some. You will owe taxes on the accrued interest at this time.

There are steep penalties if you withdraw money sooner than 5 years. If you do not want to take a lump sum at the end of the period (5 years in this case) you are allowed to roll it over (with taxes on accrued interest continuing to be deferred) in another annuity.

Massachusetts Mutual is rated A++ by AMBest. Companies rated A++ have had less than a 0.1% default rate in the last 20 years in the USA. And when there has been defaults, in almost all cases the state guarantee funds have been able to cover the amount guaranteed (usually 250k per state)

So this Massachusetts annuity offered by Fidelity is quite similar to a CD.
1) You can purchase this with a maturity of 3 to 10 years.
2) The interest rate is fixed at 1.9% for the period of 5 years for this annuity contract.
3) At the end of the contract, you are able to receive a lump sum payment of the original principal + accrued interest.
4) Your principle is backed up to $250k by Florida's Guarantee Fund
5) The interest rate you receive is exactly as stated. The agent who sells the annuity to you is making a hefty fee (usually 1 to 2%), but that fee is already calculated into the agreed upon interest rate. So there are no surprises.
6) You can buy these for your IRA, Roth or personal account.

Some difference from CD's
1) Interest grows tax deferred until you receive it at the end of the contract
2) It is not backed by the FDIC
3) Typically, this type of annuity pays a higher interest than CD's (arguably because the State Guarantee Backing is not as strong as the FDIC)
4) There are age restrictions ... This particular annuity will only be sold to you if you are under 85 years.

I'm in no way pushing this type of annuity. But they do offer a better interest rate than you can currently earn on CD's. It's important to understand that the default rate is much much higher as you move from A++ to B++ rated insurance companies. The 250k state backing is very good ... but it's not the FDIC

And I personally would not touch annuities tied to stock indexes. And I have no interest in "annuitizing" the return (receiving payments for life) in this low rate environment. For that reason I like the lump sum payment at the end of the contract.

Annuity
 

USAA if you are eligible to join. Check on the requirements.

This week Vanguard announced its exit from selling annuities to consumers. The shift encompasses both variable annuities and income annuities. The variable annuities were offered by Transamerica. The income annuities (immediate and deferred income) were underwritten by a handful of insurers and offered on a third party platform.

there are way too many types, and volume of, annuities to make a lot of generalizations. Fortunately we have our own Financial Planner who has been able to set us up with a couple of very good ones over the years.

You are asking the wrong agent then.

That is simply not true. You can get a sample policy from any company……..I think you have been dealing with the wrong agents for sure

Wow…….