[retiredguy123]

Originally Posted by bern916

You are wrong. Not ALL annuities are bad. We have a 4% 5-year FIXED annuity. We paid ZERO fees. No market exposure. Avoids probate. Grows tax deferred unless I choose to take the interest annually (or monthly).

Should all of someone's money be in fixed annuities, of course not. But it's a conservative option that can serve a purpose in anyone's retirement portfolio.

Not if you don't know what you are buying. Many people who buy an annuity have no idea what they are buying, and the insurance company will not even allow them to read the contract until they give them their money. There are television commercials that sell annuities, but they never even mention the word annuity. I have reviewed investment portfolios for people, and when I tell them that they have an annuity, it is the first time they are aware of it. They think they own stocks and bonds in their own name, not a life insurance contract. Some say that they bought it because they trusted a friend or relative to invest their money wisely. In some cases that could be true, but mostly the salespeople are selling annuities because it is their product that pays the highest commission, and often it is not appropriate for the client.

Is that any way to sell a financial product?

[MandoMan]

Originally Posted by zendog3

I took a look at my retirement savings today. My retirement is in TIAA/Cref.
The good news is that there is still enough there to get me to the grave.
The better news is that my annuity gained about $1,300 in the last 6 months.
The bad news is that my equities lost about $ 90,000.
The great news is that I din't have a dime invested in crypto currency.

Seriously, when I started saving for retirement 55 years ago, I read up and learned that I should diversify into low risk annuity and risker equities. I chose a 25/75 % split which worked well. I was often tempted to dump the annuity and put all my money in stocks. I am now glad I didn't. I only wish I had changed may diversity distribution to more annuity at time of retirement.

I would give this wisdom to my kids, but they don't listen to me anyway.

My retirement is all in TIAA mutual funds. It grew so much that to my surprise I was able to afford to live here. However, now it is down 30% from its peak. It will go back up, but no more gravy until then. If the Chinese didn’t eat weird animals that carry new diseases and the Russians stayed out of Ukraine, I’d be doing very well indeed.

[Blueblaze]

All of our retirement money is in cash and real estate. At 3% inflation, it was enough to support 30 years of retirement. At 20% inflation, we'll burn through it in 10. But if this inflation lasts that long, none of us will want to be alive 10 years from now.

So I'm currently losing 20% a year to the government theft known as inflation. That still seems preferable to losing 20% to the Wallstreet Casino on top of 20% to inflation.

The thing that makes me mad is that I'm still barely making 0.1% interest in my money market account, while mortgages are at 6% and credit cards are at 18%. Government/Banking corruption like that is why America no longer works. For the 100 years prior to the Wall Street bailout, any fool could get 4.25% on a passbook savings account at any bank, even through the Great Depression and the Carter Inflation. On the day I retired and moved my life savings from a 401K to an IRA, I did the math, and realized that after bumbling my way through three stock market crashes, my life savings would be twice as much if I could have just kept my money in a 4.25% savings account the whole time. But, of course, that option hasn't existed since the government abolished it in 2008.

Annuities? If you hold an annuity 55 years, you've beaten the actuary's statistics, along with my cash scenario. Congrats on your longevity! Not many people manage that.

In fact, an annuity ought to be the perfect investment for the average joe. Basically, you're accepting a lower rate of interest to let the professional investors at an insurance firm invest your money -- and the firm has the longevity to survive market booms and busts. On top of that, it's literally a survivor's game. Unless you choose a return-limiting rider on the policy, the fund even gets to keep your investment when you die. With a deal like that, you'd think any insurance company would be tickled to guarantee more than half the Market's average rate of return for the use of your money. But they don't have to. Unfortunately, there seems to be an endless supply of math-challenged folks who will fork over their life savings for a guaranteed monthly check, thinking the percentage represented by the ratio of their monthly check to the total investment is the investment's "return" -- which ignores the time value of money. In reality, an insurance company rarely needs to grant a real return that even matches the inflation rate.

But with inflation running at 20%, maybe it's possible to lock in that rate now with an annuity, and keep it after government comes to its senses. Maybe. And pigs might fly. I think you'll find that the math wizards at the insurance companies have already factored that possibility into their contract, but you might be able to squeeze 3-4% out of them.

Which would still be a heck of a lot better than I'm doing in cash.

[Robbb]

Originally Posted by Pgcacace

Most of our retirement money is in annuities. We have not lost any money. It was a good move.

You have also lost out in the tripling appreciation of the market over the past 10 years. The market has gone up 547% since 2009.

[Stu from NYC]

Originally Posted by Robbb

You have also lost out in the tripling appreciation of the market over the past 10 years. The market has gone up 547% since 2009.

I agree but you need to accept some risk to invest.

[Robbb]

Originally Posted by Travelhunter123

Excellent point

Totally disagree, first any investment can be set up to avoid probate, that has nothing to do with the investment. Second 4 to 5% historical return is not even a fraction of what you could have been earning. The market is up 547% since 2009. Even 30 year government bonds were paying 6% or greater during that time. Any investment that pays a sales guy 8% commission and has a 15 page contract is not in your best interest. Look up the returns for a vanilla Vanguard 60/40 fund over the past 10 years. Oh also, annuity payments are taxed as normal income, investments are taxed at the much lower (usually) capital gains. The first 77K of income of capital gains is taxed at 0%. Annuities are a screw job for the vast majority of investors.

[craigrmorrison]

I’m planning for retirement. How can you be assured that you have enough money to get you to the grave? Thanks in advance.

[Stu from NYC]

Originally Posted by craigrmorrison

I’m planning for retirement. How can you be assured that you have enough money to get you to the grave? Thanks in advance.

Get a subscription to Kiplingers and read cover to cover.

Go to local library and take out some books on financial planning.

You need to know more about planning for retirement before even thinking of meeting up with a professional financial planner.

[zendog3]

When stocks are booming, as mine were the last couple of years, annuity looks like a bad investment. When stocks are crashing as they have been lately, annuity seems like a brilliant position. Sadly, the person with a balanced portfolio is always making less that the person with an unbalanced portfolio.

I weathered a lot of market downturns when I was young. That was not a problem because I had a lifetime to recover. A crash in retirement can be a serious problem for a retiree whose savings are not diversified. I, for one, do not believe the current downturn is over. I continue to be happy that I have some annuity to protect me if this current downturn continues.
In watching the stock market casually over most of a lifetime, I observe that when any stock or group of stocks are overvalued compared to their earnings, there will be a crash. I think it is important to know the difference between investing and speculating. If you buy a security because you think the company is strong and growing, and will return profit from new sales, that is investing. If you buy a company that is overpriced because you think other people will drive up the price of your stock, that is speculation. Speculating is fine, if you are smart enough to sell before the crash. Only a fool expects the price of an overvalued stock to continue to go up forever. But, as recent history shows, a lot of fools spend their money on overpriced stocks.

[Old Bob]

Originally Posted by zendog3

I took a look at my retirement savings today. My retirement is in TIAA/Cref.
The good news is that there is still enough there to get me to the grave.
The better news is that my annuity gained about $1,300 in the last 6 months.
The bad news is that my equities lost about $ 90,000.
The great news is that I din't have a dime invested in crypto currency.

Seriously, when I started saving for retirement 55 years ago, I read up and learned that I should diversify into low risk annuity and risker equities. I chose a 25/75 % split which worked well. I was often tempted to dump the annuity and put all my money in stocks. I am now glad I didn't. I only wish I had changed may diversity distribution to more annuity at time of retirement.

I would give this wisdom to my kids, but they don't listen to me anyway.

The stock market is just like a roller coaster. The only ones that get hurt are the ones that fall off----just hold on tight!!!

[rsibole]

Originally Posted by jedalton

most kids know everything, I know I did. Whish I had listened

A little too late . . .

[Altavia]

Originally Posted by rsmurano

The only people making money from annuities are the salesman. You missed out from some of the biggest gains in the stock market from 2017-2020 in history. You lost $90k I’m assuming ytd, I made $140k in the last 2 months from 1 etf, so you can still make money, just not in annuities.
I get it, keep investing in the market, even more so when it’s down since you will buy more shares and eventually it will come back. This is true, especially when your 40, 65 or older, not so sure.
In years past, I never sold a share in 2007 or in 2020, but I sold everything early this year (did buy into an etf a few months ago). Market is down 20-30% and I think it will still get worse. So instead of waiting a year or more after the market starts to recover to regain all the losses, I will jump back in and make 20-30% while the market recovers. Cash is king in a down market. You can’t time the market, so I might miss a few % gain from the start of the economy rebound, but it will be a good gain.

The reality of trying to time the market.

Does Market Timing Work? | Charles Schwab

[Plinker]

Marcus money market at Goldman Sachs currently pays 1% with no minimum. People don’t need to settle for the bupkis offered by banks. If people would take a little time educating themselves on the most basic tenets of financial planning, they wouldn’t choose such a paltry rate.
I use laddered MYGA’s (multi year guaranteed annuity) vs bank CD’s as the rates are FAR higher and backed by the issuing insurance company and the State of FL.
I agree that ALL annuities are not bad. A pension and SS are types of annuities and are quite popular with retirees. IMO, the “financial advisors” peddling variable and index annuities in TV are a pox on society and prey on vulnerable seniors.
Also, gotta love that VOO!

[retiredguy123]

Originally Posted by Plinker

Marcus money market at Goldman Sachs currently pays 1% with no minimum. People don’t need to settle for the bupkis offered by banks. If people would take a little time educating themselves on the most basic tenets of financial planning, they wouldn’t choose such a paltry rate.
I use laddered MYGA’s (multi year guaranteed annuity) vs bank CD’s as the rates are FAR higher and backed by the issuing insurance company and the State of FL.
I agree that ALL annuities are not bad. A pension and SS are types of annuities and are quite popular with retirees. IMO, the “financial advisors” peddling variable and index annuities in TV are a pox on society and prey on vulnerable seniors.
Also, gotta love that VOO!

The Vanguard Federal Money Market fund is now paying 1.35 percent.

[Plinker]

Originally Posted by retiredguy123

The Vanguard Federal Money Market fund is now paying 1.35 percent.

Thanks for the update. Marcus is actually paying 1.1%. I did have cash in the Vanguard MM fund you describe for many years but switched when Marcus started offering much higher rates. Both choices are vastly superior than banks.