are annuties from insurance cos. a safe investment

Message Author
ampm-bookmark
delicious-small Add to delicious
yahoomyweb-small Add to YahooMyWeb
blinklist-small Add to BlinkList
PostPosted: Sun Jun 14, 2009 6:52 pm   Post subject: are annuties from insurance cos. a safe investment  

I have two. I am happy wiyh their performance but am worrying if they could fail in this economy

osceolarose
New member
Leave a quick message



Joined: 14 Jun 2009
Posts: 1


1.67 Dollars($)

PostPosted: Mon Jun 15, 2009 5:01 am   Post subject:   

Your annuities are safer than you realize. There are so many reasons that an annuity is safer than most other investments, but here are a few.



1. Reserve Requirements - If you put $1 in the bank, they need to keep about 3 pennies of it on deposit and held "in reserve." An insurance company is required to keep dollar for dollar in reserve!



2. FDIC is a joke, and I don't want to start a big debate on it (Did you know they have 20 years to pay you back...and if the major banks failed they would just print more money making it useless!)...



The annuity is basically secured by each state's insurance division. There are a lot of components involved, but just know that if the insurance company goes belly up...you don't lose your money!



Look up Gary Spicuzza (sp?) and ask him if an annuity is safe...you'll get all the information you want to hear!

ChrisBantly
Senior member
Leave a quick message



Joined: 11 Mar 2009
Posts: 381

Location: Upstate SC
1.16 Dollars($)

PostPosted: Mon Jun 15, 2009 5:24 am   Post subject:   

Quote:
I have two. I am happy wiyh their performance but am worrying if they could fail in this economy




What type of annuity plans are these?
JeremyHolter
Senior member
Leave a quick message

Jeremy Holter

Joined: 06 Jun 2007
Posts: 1185


210.40 Dollars($)

PostPosted: Mon Jun 15, 2009 5:27 am   Post subject:   

Hi osceolarose..



Quote:
are annuties from insurance cos. a safe investment




I'd thank Chris for his detailed explanation. But at the same time I'd ask you one simple question-



What all investment options would seem safer to you than this one under the present downturn?



Steven
steven
Senior member
Leave a quick message

steven

Joined: 02 Feb 2006
Posts: 1546


215.92 Dollars($)

PostPosted: Mon Jun 15, 2009 4:52 pm   Post subject:   

Quote:
I have two. I am happy wiyh their performance but am worrying if they could fail in this economy




The answer to whether they are safe is "maybe".



If it is a variable annuity, there is lots of risk and the insurance company doesn't make much of a difference except for any guarantees that may be backed by the insurer.



If it is a fixed annuity, the safety will based upon a combination of the company strength and the amount invested.
InsuranceExpert
Senior member
Leave a quick message



Joined: 05 Apr 2009
Posts: 662


142.74 Dollars($)

PostPosted: Mon Jun 15, 2009 7:18 pm   Post subject:   

What type of annuity accounts do you have? If they are variable, then they are subject to the whims of the stock market. Otherwise, fixed and indexed annuity accounts are quite safe.



They are backed by the full faith of the insurance company and the Guaranty Assoc in your state. Usually insured up to 100k per contract and 300k per household.



_________________

JT

http://www.ohioinsureplan.com/



http://www.ohioinsureplan.com/index.php/annuities/annuity-quotes/



Health insurance quotes, Medicare supplements, annuity quotes, and life insurance coverage.
JTInsure
Member
Leave a quick message



Joined: 30 Apr 2009
Posts: 76

Location: Ohio
18.40 Dollars($)

PostPosted: Tue Jun 16, 2009 2:28 am   Post subject:   

Regarding Fixed Indexed Annuities:



Quote:
"There is no asset category that outperformed them."

Professor David Babbel of Wharton speaking about index annuity returns

- Forbes 6 June 2009




Since 1995 when Fixed Indexed Annuities first hit the market, "There is no asset category that outperformed them."



The reason for this is because there isn't any downside risk of principal.



Gains are locked in and when the market is flat or down the worst thing that happens is the client receives 0% interest for that year.



A 25% loss of princpal (2001 crash) requires a 47% gain the following year to keep even with a boring annuity that's just limping along at 5% per year.



A 39% loss of princpal (2008 crash) requires a 80.73% gain the following year to keep even with a boring annuity that's just limping along at 5% per year.



A Fixed Annuity is the place to put your money after you've made your money and no longer want to risk your principal with the day traders on Wall St. playing stocks like a flea market swap meet.


_________________

Gary Spicuzza, *SAFE

Copyright 1956.

No Rights Reserved.

*Self Appointed Financial Expert
GarySpicuzza
Forum Expert
Leave a quick message


Forum Expert

Joined: 03 Apr 2008
Posts: 965

Location: West Pasco County, FL
243.98 Dollars($)

PostPosted: Tue Jun 16, 2009 5:50 am   Post subject: Can one convert a variable annuity to a fixed one?  

Can one convert a variable annuity to a fixed one when the VA isn't performing well?


_________________
Register Now to have your Insurance queries solved.
anonymous12
Guest







PostPosted: Tue Jun 16, 2009 10:45 am   Post subject:   

You can 1035 exchange:



Life Insurance for Life Insurance;



Annuity for Annuity;



Life Insurance for Annuity.



You CANNOT 1035 exchange an Annuity for Life Insurance.



Quote:
Section 1035 of the Internal Revenue Code



Title 26 — Internal Revenue Code ("IRC")



Sub Title A — Income Taxes



Chapter 1 — Normal Taxes and Surtaxes



Subchapter O — Gain or Loss on Disposition of Property



Part III — Common Non-Taxable Exchanges



Updated: Friday, July 14, 2006



Section 1035 — Exchange of Stock for Property



(a) General rules --



No gain or loss shall be recognized on the exchange of --



(1) a contract of life insurance for another contract of life insurance or for an endowment or annuity contract; or



(2) a contract of endowment insurance (A) for another contract of endowment insurance which provides for regular payments beginning at a date not later than the date payments would have begun under the contract exchanged, or (B) for an annuity contract; or



(3) an annuity contract for an annuity contract.


_________________

Gary Spicuzza, *SAFE

Copyright 1956.

No Rights Reserved.

*Self Appointed Financial Expert
GarySpicuzza
Forum Expert
Leave a quick message


Forum Expert

Joined: 03 Apr 2008
Posts: 965

Location: West Pasco County, FL
243.98 Dollars($)

PostPosted: Tue Jun 16, 2009 11:10 am   Post subject:   

Quote:
Can one convert a variable annuity to a fixed one when the VA isn't performing well?




Yes, but if this is your thought process, you are the type of person who should always be a long term saver instead of an investor.



It's ok to be a long term saver. It's ok to be a long term investor. If you go back and forth, you will get crushed.



Ex. Anonymous12 buys a VA with $100,000. The market takes a hit and his investment is now worth $60,000. He takes his money out and puts it into a fixed product that averages 5% a year. After 11 years, he still has less than the $100,000. If his money was getting 5% every year, he would have had $171,000.



People who go back and forth, buy high and sell low.
InsuranceExpert
Senior member
Leave a quick message



Joined: 05 Apr 2009
Posts: 662


142.74 Dollars($)

PostPosted: Tue Jun 16, 2009 11:13 am   Post subject:   

Quote:
Since 1995 when Fixed Indexed Annuities first hit the market, "There is no asset category that outperformed them."



The reason for this is because there isn't any downside risk of principal.




I don't know if it is true or not that there has been no asset class to outperform them. Do you have anything to back up that assertion?



It is true that there is no downside risk of principal.



It is false that the reason that they outperformed because of the lack of downside risk. Over most 10 year periods, equities will outperform them precisely because they do have downside risk. They outperformed because equities did so poorly.
InsuranceExpert
Senior member
Leave a quick message



Joined: 05 Apr 2009
Posts: 662


142.74 Dollars($)

PostPosted: Tue Jun 16, 2009 12:12 pm   Post subject:   

Quote:
I don't know if it is true or not that there has been no asset class to outperform them. Do you have anything to back up that assertion?


Yes, 4th grade math. It's not an assertion, it's a mathematical fact.



A 25% loss of principal (2001 crash) requires a 47% gain the following year to keep even with a boring annuity that's just limping along at 5% per year.



A 39% loss of princpal (2008 crash) requires a 80.73% gain the following year to keep even with a boring annuity that's just limping along at 5% per year.



Quote:
It is true that there is no downside risk of principal.



It is false that the reason that they outperformed because of the lack of downside risk. Over most 10 year periods, equities will outperform them precisely because they do have downside risk. They outperformed because equities did so poorly.


The statement above is contradictory and mathematically false.



Insurance Expert pick any 10 year period Jan 1995 through Dec. 2008 in the S&P 500 that out performed a Fixed Indexed Annuity. Tell me what 10 years you want to chart.



A person will NEVER make up a 39% loss of principal.


_________________

Gary Spicuzza, *SAFE

Copyright 1956.

No Rights Reserved.

*Self Appointed Financial Expert
GarySpicuzza
Forum Expert
Leave a quick message


Forum Expert

Joined: 03 Apr 2008
Posts: 965

Location: West Pasco County, FL
243.98 Dollars($)

PostPosted: Wed Jun 17, 2009 9:41 am   Post subject:   

Gary, I have no problem with fixed annuities. This includes "traditional" fixed annuities and indexed fixed annuities.



Is there a problem with me asking you to back up your assertion? Saying that it's 4th grade math does nothing to back up what you are saying. I am asking a legitimate question. I wasn't being argumentative.



It seems pretty strange to refer to fixed indexed annuities as an "asset class". The performance of an FIA is obviously going to be based upon the crediting method used and the underlying index. If FIAs are an asset class, can please tell us what the rate of return was for this class? I'm not saying that your assertion is wrong or correct. I have no idea. That is why I'm asking. I'm having trouble finding this information since to the best of my knowledge, this is an asset class that doesn't exist.



For comparison sakes, here are how some indexes performed since 1/1/95 through 5/31/2009:



S&P 500 6.85%

DJIA 8.02%

Citigroup Broad Investment Grade Bond 6.88%

NASDAQ 6.14%

180 Day CD’s 4.2%

Thompson US High Yield Bond 4.32%

MSCI Emerging Markets 5.72%

MSCI EAFE Index 4.10%

InsuranceExpert
Senior member
Leave a quick message



Joined: 05 Apr 2009
Posts: 662


142.74 Dollars($)

PostPosted: Wed Jun 17, 2009 9:58 am   Post subject:   

Quote:
A 25% loss of principal (2001 crash) requires a 47% gain the following year to keep even with a boring annuity that's just limping along at 5% per year.



A 39% loss of princpal (2008 crash) requires a 80.73% gain the following year to keep even with a boring annuity that's just limping along at 5% per year.




This is true, but does it matter? Equities aren't short term investments. What FIA pays 5% when the market is dropping 39%?



We are talking about very different products with very different purposes. A boring 5% is great when the markets are dropping. However, if that is what someone got since 1/1/95, they have a lot less money than they would have had by investing in the S&P 500 or the Dow. Despite two giant drops, there is still a huge difference. $100,000 into an annuity paying 5% would now give the person $212,000. The S&P 500 would give $277,000. The Dow would have given $328,000.



I’m not arguing for one product over another. Fixed and variable products both have their place. I just believe that showing what happens over a one year period of time is a disingenuous comparison. By the same token, showing how a variable product has outperformed long term doesn’t mean that somebody shouldn’t own fixed products.
InsuranceExpert
Senior member
Leave a quick message



Joined: 05 Apr 2009
Posts: 662


142.74 Dollars($)

PostPosted: Wed Jun 17, 2009 10:19 am   Post subject:   

Quote:
The statement above is contradictory and mathematically false.



Insurance Expert pick any 10 year period Jan 1995 through Dec. 2008 in the S&P 500 that out performed a Fixed Indexed Annuity. Tell me what 10 years you want to chart.



A person will NEVER make up a 39% loss of principal.




How about if we start with 1/1/95-12/31/2004? The S&P returned 12.07%. A $10,000 investment grew to $31,241.



1/1/96-12/31/2005? 9.07% $10,000 grew to $23,830

1/1/97-12/31/2006? 8.42% $10,000 grew to $22,441

1/1/98-12/31/2007 5.91% $10,000 grew to $17,752



It's simply a false statement that someone will NEVER make up a 39% loss of principal. First of all, your statement ignores all gains made before the loss. Like I’ve already pointed out, despite the drop, the S&P 500 still has returned 6.85% since 1/1/95. Going forward, a 10% average return would mean that it would take about 5 years to break even. 8% would mean about 6.5 years.



Gary, I can’t state this enough that I have no problem with fixed products. Everybody should own some fixed products in their portfolio. It’s just that it makes no sense to compare them to variable products. If the markets are good, variable products will outperform. If the markets are bad, fixed products will outperform. We don’t know if the markets will be good or bad.
InsuranceExpert
Senior member
Leave a quick message



Joined: 05 Apr 2009
Posts: 662


142.74 Dollars($)

Quick Reply
Your Name
Subject
Message body
All times are GMT
1, 2  Next  
Page 1 of 2


Get a Quote
Ask Community Experts

flash plugin

Quick Links

Must See

Community

Hot topics in forums

Latest in blogs

AmPmInsure on Facebook



Page loaded in 0.275 seconds.