[WiseSpender]

There are so many agents here selling all types of annuities here in The Villages. Usually that means something. If you see a lot of something being peddled for a very long time in a certain locale, it means that the item being peddled is being successfully sold in significant quantities to the locals . Up north, annuities are rarely mentioned anywhere , but down here in our community, it seems to be as natural a phenomenon as golf carts . I was wondering if any of you can impart any of your own experience with any annuity you purchased while down here (and who you purchased from), and how it has performed for you (if you could also provide numbers, rather than saying, "It has done well for me" or "It was a big mistake", that would be more useful).

[dewilson58]

Here vs. up North...................Here: high concentration of old people looking for guaranteed payments during their final years.

That "guarantee" comes at a high price..................Low rate of return & High fees & lack of flexibility.

[retiredguy123]

In my experience, annuities are sold everywhere because it is one of the highest commissioned products for an insurance salesperson to sell. Often, an inexperienced person will be sold an annuity, and they don't even know that they are buying an annuity. An annuity is a life insurance contract.

[dewilson58]

Invest in quality toilet paper.

[Babubhat]

Annuities is a word that should never be spoken. If you must go to Vanguard with lowest costs. car salespeople pushing a different product. Your money deserves better

[Carla B]

On the "Disdain Scale," annuities are second only to reverse mortgages around TOTV.

[MrFlorida]

When I hear someone trying to sell me an annuity, I run the other way.

[mrf0151]

Yes, Annuities are a high profit product for the company you purchase it from and the company selling it. For example, there is a company here in TV that sells annuities exclusively. They will go unnamed, but I can only say you see lots of people here in The Villages wearing the company's logo clothing and going to the parties they throw. You also see this companies' billboard signs all over TV. Where the heck people do you think this advertising money is coming from??? YOUR POCKETS!!

[Robbb]

Any investment that has 10 pages of fine print explaining the investment means you are getting screwed. The fine print is not there for your benefit.

[retiredguy123]

Originally Posted by Robbb

Any investment that has 10 pages of fine print explaining the investment means you are getting screwed. The fine print is not there for your benefit.

10 pages? Most annuity contracts are more than 100 pages, and the company will not allow you to read it until you pay the money and agree to buy the annuity. Then, after you have paid the money and receive the contract, you have 30 days to cancel the contract and ask for a refund.

[Boomer]

Asking questions on TOTV is fine and can be a good place to start, but I hope you are going to do your own homework if you are considering buying an annuity. Actually, this thread will probably leave you with more questions than answers -- and that's not a bad thing.

I never got into annuities because I did not want to -- but you might want to -- so at the risk of sounding like I am giving you a homework assignment, may I pass along a few things for you to think about, to educate yourself.


Things I (sort of) Know (and/or think) about Annuities

1. Some people stop listening after they hear the word 'guaranteed' -- a powerful word, indeed -- and that's all they think they need to know. GONG!

2. I don't think of annuities as an investment. I think of them as a product because they are sold under a contract. It is like an insurance policy.

3. There are management expenses in those contracts somewhere. The company that sold the annuity invests your money while you get the contracted percentage. I don't think you ever see where your money is invested. It's kind of like you say, "Have at it, but just make sure the check is in the mail."

4. If the insurance company that sells the annuity fails, I think it then goes to some sort of rehabilitation fund. Then another insurance company can go to the state and say it will do the rehabilitating. That could take a while. (I don't know if this backup varies by state. Anyway, I think it is a good idea to know how the insurance company is doing before you buy in.)

5. There are different kinds of annuities. (I will not try to explain them all because I have never dug that deep.) But you can get started by reading up on Fixed Annuities v. Variable Annuities v. Index Annuities.


4. There are sometimes things that can be added to an annuity -- like a death benefit. The extras come at an extra cost to you.

5. I have never bought an annuity, but, as I understand it, there is a 30 day look back, like a window, after you have signed the contract, so you can change your mind. (But I do not know for sure if this is always the case, or if it varies by state or company. Find out, for sure.)

6. That word 'guaranteed' should maybe be thought of as being kind of like a faucet -- to be turned on and then to be turned off. If someone outlives the guaranteed time period, I think they might have to take the original investment -- sounds good -- but I am pretty sure the full amount would be taxed as ordinary income. That could be a chunk of change. Be sure to check on how that would work with the different types of annuities. Just something to be aware of.

7. For those who already have an annuity, they might want to know that there is something in the tax code that can allow an annuity holder to switch companies. It is called a 1035 Exchange -- but I don't know how it works. (I do wonder if those buying annuities have ever had the salesperson voluntarily explain that one.)

8. Most of the items listed above are things I know only a little bit about. I am not a financial advisor. I am just some nice, silver-haired lady on the internet, who is just trying to get you to do your own homework by giving you some things to think about and to understand before you buy an annuity.

9. One thing I do know for sure -- Never buy on the day you are being "sold."

Now then, aren't you glad you asked.

Mrs. Boomer

PS: Embrace your own critical thinking skills -- and enjoy that free steak dinner.

[npwalters]

Originally Posted by retiredguy123

In my experience, annuities are sold everywhere because it is one of the highest commissioned products for an insurance salesperson to sell. Often, an inexperienced person will be sold an annuity, and they don't even know that they are buying an annuity. An annuity is a life insurance contract.

A more accurate description would be an annuity is a contract sold or underwritten by an insurance company.

My mother bought a guaranteed annuity in her 60s and lived to be 93. That investment paid off many times over. Could she have earned more by investing herself? Sure - if she understood the market and was willing to invest the time. She was very happy with her choice.

[petsetc]

My obligatory advice, take time to read Paul Merriman’s 3 FREE ebooks.
1. First-Time Investor
2. 101 Investment Decisions
3. Get Smart or Get Screwed (read this first!)

Found at paulmerriman.com

Also on his site are recommended portfolios for using Vanguard, Fidelity, T.Rowe Price or Schwab for DYI'ers. Much good info, ignore the puffery and sales pitches.

Also, if you want to know too much about annuities, listen to Stan The Annuity Man® | Brutally Honest Facts About Annuities podcasts.

Fun With Annuities Jay Zawatsky: How Debt & Energy Connect

[retiredguy123]

I would just add that an annuity is a life insurance contract, and it automatically has a death benefit, although the benefit is minimal. That is how the policy qualifies for tax deferred income. Any income earned in an annuity is taxed as ordinary income, and no capital gains rates apply. Many people buy an annuity with the intention of keeping it for a long time, but the insurance companies know that you probably won't, so they end up making a lot of money on the surrender fees, which can extend up to 10 years. They guarantee that you will not lose money, but they don't tell you that the management fees and surrender fees do not count as losing money. An annuity is not an investment because you don't actually own any assets in your name. Everything is in the company's name with a contractual promise to pay you back.

[guitarguy]

No one buys an annuity, they are sold an annuity.
If you really want an annuity, vanguard sells them commission free.