Fixed Annuities have one (1) negative feature.

Message Author
ampm-bookmark
delicious-small Add to delicious
yahoomyweb-small Add to YahooMyWeb
blinklist-small Add to BlinkList
PostPosted: Wed Apr 16, 2008 2:20 pm   Post subject: Fixed Annuities have one (1) negative feature.  

Quote:
There is exactly one (1) negative feature in a Traditional Fixed Annuity or Fixed Indexed Annuity contract.



The SURRENDER charges.



They last 5, 7, 10, 12, or 15 years and DECREASE each and every year. A typical 10 year surrender charge schedule would be (12%, 11%, 10%, 9%, 8%, 7%, 6%, 5%, 4%, 2%, 0%)



These "surrender charge" percentages, while at first glance appear unusually severe or draconian, but in mathematical reality are nothing more than an "interest penalty."



Fixed Annuities are NOT designed for someone to put their money in and take it right back out like some day trader playing the Stock Market like a flea market swap meet.



They are designed for Seniors over the age of 70, primarily for the wealth preservation and transfer of their cash asset DIRECTLY to their beneficiaries or to provide a guaranteed lifetime income stream.



Let's pick on, End of Year 2, in the actual contract below.



Attorneys, stock brokers, bankers and news media would lead a client to believe if the client made an initial premium deposit of $50,924.90 and wanted to "get out" of the contract the on the last day of year two (2) she would lose 11% of her money. They would claim the insurance company would only pay her $45,323.16.



NOT TRUE, the above is an absolute twisted material misrepresentation.



These mathematical Einsteins can even "prove it" on their calculators. They'll take her initial premium of $50,924.90 and subtract 11% and then show the result of $45,323.16.



The only problem with their calculation is the fact it's totally WRONG and doesn't jive with the stated MINIMUM CASH SURRENDER value printed in the policy of $52,340.26 at the end of year two (2).



The correct calculation goes like this:



Premium of $50,924.90 PLUS 10.75% first year interest equals an account value of 56,399.32 PLUS MINIMUM "Guaranteed Interest" of 3% equals an end of year two (2) MINIMUM account value of $58,091.30.



Now let's figure her actual MINIMUM cash surrender value end of year two (2) and see if my calculations match what's printed in the policy.



The first thing to understand is the fact most ALL annuity contracts allow a 10% "free withdrawal provision" per year. With that in mind, the calculation goes like this:



Account value end of year 2 equals $58,091.30, MINUS, the 10% "free withdrawal provision" equals, $52,282.17, that is subject to the withdrawal charge of 11%. $52,282.17 times 11% equals a surrender penalty of $5,751.04.



$58,091.30. (the MINIMUM account value) MINUS $5,751.04 (the correct surrender charge) equals a MINIMUM cash surrender value of $52,340.26. EXACTLY as it's printed in the policy!



So by the end of year two (2) the client could have cashed in her annuity and received back every penny she put into the contract plus some.



Question for Stock Brokers: Would you recommend an 80 year old widow cash out her annuity and risk her money in Stocks or Mutual Funds?



Question for Bankers: Would you recommend she put her funds in bank CDs that on average pay 1% to 2% less than her annuity?



Question for Attorneys: Would it be better for her to exempt her cash asset pursuant to Florida Statute 222.14 and pass the cash asset upon her death DIRECTLY to the named beneficiaries AND avoid Probate Court at the same time or should she pass it under her Last Will and Testament so you can collect your 3% share pursuant to Florida Statute 733.6171???



Fixed Annuity Data Page.Used with permission.








Fixed Annuity Surrender Page.Used with permission.





_________________

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
243.95 Dollars($)

PostPosted: Wed Apr 16, 2008 9:16 pm   Post subject:   

Amen brother.

Fishman
Preferred member
Leave a quick message



Joined: 04 Apr 2008
Posts: 143


45.32 Dollars($)

PostPosted: Thu Apr 17, 2008 11:42 am   Post subject:   

See THIS link.



Did you know Ben Bernake the chariman of the Federal Reverve has the bulk of his cash asset split between two (2) annuities?



One is a Traditional Fixed Annuity and the other is a Variable Annuity.



Each annuity is valued between $500k to 1 million dollars which means he has a minimum of $1 million and a maximum of $2 million dollars invested with annuities. This represents the bulk of his retirement savings and wealth.



His next closest investment in terms of dollar amount is a Wachovia money market account valued between $50,001 to 100K.



Anyway, I just wanted share some financial trivia with anyone who may read this thread.



If I sold annuities I would first explain the surrender charge schedule to my clients. Then I'd have them sign the brochure at that section and make a copy for myself.



Then I'd ask....



"Setting aside the surrender charge schedule, what's the "other" negative feature of a Traditional Fixed or Fixed Indexed Annuity?"



You'll find they will never be able to give you one.



P.S. Are there any Stock Brokers, Attorneys, Bankers or News Media out there who are up for a good Internet thread war on this HOT topic?



_________________

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
243.95 Dollars($)

PostPosted: Fri Apr 18, 2008 9:35 am   Post subject:   

Quote:
THERE ARE NO SURRENDER CHARGES AFTER THE 12TH POLICY YEAR




No charges (at all???) if I surrender at that point of time? Or is it that there are some other charges?

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







PostPosted: Fri Apr 18, 2008 11:32 am   Post subject:   

There are no surrender charges whatsoever after the 12th policy year.



Period.

End of Story.



See THIS link.



_________________

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
243.95 Dollars($)

PostPosted: Fri Apr 18, 2008 4:09 pm   Post subject:   

I don't sell annuities although I'm interested in them on a personal basis.



What are the typical returns one might expect on an annuity?

How is the money invested?

What are the minimum and maximum returns available on the market?

salpro22
Member
Leave a quick message



Joined: 08 Feb 2007
Posts: 53

Location: Connecticut
22.24 Dollars($)

PostPosted: Fri Apr 18, 2008 9:34 pm   Post subject:   

Quote:
What are the typical returns one might expect on an annuity?


With a Fixed Indexed Annuity one could expect to average 6.4% per year over a ten (10) year period with AVERAGE being the operative word.



Quote:
How is the money invested?


The client's money isn't "invested" anywhere EXCEPT safe and sound with the issuing insurance company like any other FIXED annuity. The trade off is how excess interest is credited based on an outside market index such as the S&P 500.



Quote:
What are the minimum and maximum returns available on the market?


This depends on the Insurance Company but typically for the monthly point to point annual sum strategy would be between 0% to 24%. This assumes the monthly cap is 2%. The worst thing that happens to a client's money is they get 0% return if the market is flat or goes south.



One must one understand the value of NOT losing money. A 25% loss in one year will require a 47% gain the following year to just break even with a safe investment that's just limping along at 5% per year.



The actual statement below is not typical but it is an example of capturing "some" of the gains of the market without risking one penny of principal. Once interest is credited it can never be lost.





_________________

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
243.95 Dollars($)

PostPosted: Sat Apr 19, 2008 3:56 am   Post subject:   

I don't sell annuities either. I investigate and assist in the prosecution of those agents who misrepresent the terms and conditions of the annuities and/or life insurance products. Did anyone see Tricks of the Trade on Dateline last week? That was a great show.



_________________

Please feel free to go to my website at www.markcolbert.com or, if you have a specific question, you can email me directly. I hope I can answer any questions you might have. If not, I can certainly find an answer right away.
InsInvestigator
Community Consultant
Leave a quick message

InsInvestigator

Joined: 13 Oct 2007
Posts: 624

Location: Central California
41.83 Dollars($)

PostPosted: Sat Apr 19, 2008 12:03 pm   Post subject:   

Mark I didn't see that show, but I understand video editing.



Hey did Dateline happen to mention that EACH and EVERY life insurance policy and Annuity Contract written has a 10, 20 or 30 day FREE LOOK period that is BOLDLY printed on the very first page of the contract?



I would think THAT fact would be very good information for the annuity insurance buying public.



It says something to the effect: If you are not satisfied with this contract for any reason return it to the agent or to the company for a full refund of your money.



Did they mention that fact?



Well maybe they forgot....kind of like how the surrender charge schedule is "hidden" in BOLD PRINT in an annuity contract on the Policy Data Page, usually the second page of most contracts. Without the aid of the Hubble Telescope I don't know how anyone would find them?



Did I mention the FREE LOOK PERIOD is boldly printed on the very front page cover of ALL annuity contracts.



The FREE LOOK PERIOD starts on the day the client receives the contract in their hands.



_________________

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
243.95 Dollars($)

PostPosted: Sat Apr 19, 2008 3:21 pm   Post subject:   

Gary, The problem lies in the fact that the stupid consumers believe their agents instead of going through the policy page by page in order to understand the different policy provisions printed in bold. For some idiotic reason though, people actually believe their agents to be loyal, honest, and trustworthy. Isn't that one of the most stupid things you've ever heard?



For example, There were 10.7 million stupid people who believed their MetLife agents and 11.5 million people (who obviously couldn't read either) who had the audacity to actually trust their Prudential agents.



I'm afraid that I'm with you on this point; people should review their policies, maybe take a class and learn all they can about insurance and annuity products before that Free Look Period expires. If the public took the time to learn about the products, they would have absolutely no excuse when their policies failed. You are correct in that people have the right to to return the contract if they are unhappy with it. They should therefore take the time to learn about the product so they would know what to be unhappy with.



They should know that 40% of all agents cannot be trusted and take more responsibility for their policy's success or failure.



_________________

Please feel free to go to my website at www.markcolbert.com or, if you have a specific question, you can email me directly. I hope I can answer any questions you might have. If not, I can certainly find an answer right away.
InsInvestigator
Community Consultant
Leave a quick message

InsInvestigator

Joined: 13 Oct 2007
Posts: 624

Location: Central California
41.83 Dollars($)

PostPosted: Sun Apr 20, 2008 1:16 am   Post subject:   

Wow! A spirited debate with an intelligent person.



I'll play!



Quote:
They [clients] should know that 40% of all agents cannot be trusted...


Hmmmmm 40% can't be trusted? That's a little bit on the sensational high side. Wouldn't you agree?



I would restate that and say that 40% of all agents can't find their asserisk with both hands. The failure rate is extremely high in the insurance business which may lead to bad agent-to-client judgments the few months just before the agent crashed and burned.



I don't know if this is still true today but I heard that if an agency hired 100 brand new agents on Jan 1st by Dec 31st of that same year they'd have 10 agents left and by Dec 31st of the next year only 2 would still be in the business.



Moving on....



Quote:
For example, There were 10.7 million stupid people who believed their MetLife agents and 11.5 million people (who obviously couldn't read either) who had the audacity to actually trust their Prudential agents.




Mark, come on now....did you mean to say there was some type of class action lawsuit and 10.7 million MetLife policyowners and 11.5 million Prudential policyowners were eligible for some type of $1.95 settlement?



To claim there are/were 10.7 million and 11.5 million DISATISFIED policyowners is just a little too high to be credible.



Hey, by the way, are you related to Stephen? Wink


_________________

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
243.95 Dollars($)

PostPosted: Sun Apr 20, 2008 5:32 am   Post subject:   

Hey Gary, Yeah, you're right. It wasn't 40%. It was actually 39.6% and I bolstered it a bit. I have no worrries about anyone questioning this figure listed on my home page. Believe me; with all the time I've spent in depositions, it has been questioned many times by the most expensive defense teams money can buy.



Although I don't have the exact figures here in front of me, it's pretty easy to figure out.



First, take all the people who were involved in those big class suits against the insurance companies from 1983 to roughly 1998. Since you already have the Metlife and Prudential numbers, we'll add the 9.4 million New York policy holders, the 5.7 million John Hancock people, throw in Guardian, Aetna, Sun Life, Equitable, and Conseco for good measure.



Add all these policy holders up and divide by the total number of policies written during that same time frame (this information is available through NAIC) and hit enter. It comes out to 39.6%. C'mon, do you really think I could post something so detrimental to the insurance industry on a site that gets over 3000 hits a month and get away with it?



You are right again about the incredibly high turn-over rate in the insurance marketplace. If you've spent much time as an agent, you're probably flabbergasted with the fact that nobody seems to prospect anymore. Everyone wants leads!! Back in the old days it was different and agents cared about their policy retention rates.



Quote:
To claim there are/were 10.7 million and 11.5 million DISATISFIED policyowners is just a little too high to be credible.




You know, I'm not sure how to answer this one so I'll fall back on Insurance Law.



Accept that class suits involve a large group of people who have been (not probably been) similarly damaged. We start by finding a dozen-or-so class reps. These, as you know, are the ones who are chosen to represent the masses.



Once the ways in which the class reps have been [similarly] damaged has been assessed, the "points" as they are called, are listed on a class complaint that must be certified by a court of law.



Once this has been done, an insurance company is required by the court to notify those people [who have been similarly damaged] in writing. Whether they do so is an entirely different story.



So, in short, the huge number of Metlife and Prudential victims were actually submitted to the court by the insurance companies - they, and no one else, picked out the number of victims. I know; the settlements were a joke.



No, I'm related to Jim and Don.


_________________

Please feel free to go to my website at www.markcolbert.com or, if you have a specific question, you can email me directly. I hope I can answer any questions you might have. If not, I can certainly find an answer right away.
InsInvestigator
Community Consultant
Leave a quick message

InsInvestigator

Joined: 13 Oct 2007
Posts: 624

Location: Central California
41.83 Dollars($)

PostPosted: Sun Apr 20, 2008 12:16 pm   Post subject:   

Quote:
We start by finding a dozen-or-so class reps.


Well let's called it a bakers dozen (13) so we can understand the math.



Please correct me if WRONG. I want to make sure I understand how this works.



Snoopy from MetLife sells 10.7 million policies of whatever form to protect people from the little if in Life.



Out of that 10.7 million 13 are dissatisfied with "something" to the point of calling the law firm of Dewey, Cheatum and Howe for a free consultation.



Well, may I have a drum roll please......$$@#@$$@#@$$@#@$$@#@$$.



The Plaintiff's lawyers are very much interested in their "problem" for the right price. Say 35% of some multiple million dollar figure.



So at the end of the day 13 people got their money back PLUS a cut of the settlement for this perceived injustice.



But what about the "other" 10,699,987 harmed persons? What happens to them and their polices? Don't they count too?



No. They don't count; they are too stupid to even realize they were taken advantage of by some insurance policy that was approved for sale by the Department of Insurance in their home state.



Yep, when you get your little class action "settlement" notification make sure you send it back with a self-addressed stamped envelope to get your $1.95 of which you will only net $1.13 because you had to pay for the stamps.



Most of these type lawsuits are bogus and they NEVER see the inside of a court room because it's just simply less expensive to pay a negotiated settlement to the Plaintiff's lawyers than it would be to win in court.



Not to mention the video editing that's done by Chris Hansen and clueless Katie. But hey Katie only has 22 minutes to sensationalize her story. So let's not let the facts interfere with selling commercial time to the spoon-fed masses.



This thread is unreconizable from its original subject matter:

Quote:
There is exactly one (1) negative feature in a Traditional Fixed Annuity or Fixed Indexed Annuity contract.



The SURRENDER charges.


_________________

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
243.95 Dollars($)

PostPosted: Fri Apr 25, 2008 3:22 pm   Post subject:   

I appreciate the information Gary.



Quote:
The client's money isn't "invested" anywhere EXCEPT safe and sound with the issuing insurance company like any other FIXED annuity. The trade off is how excess interest is credited based on an outside market index such as the S&P 500.




How do you mean the clients money isn't invested anywhere? What specifically represents "safe" and "sound?" Are you saying the company doesn't take my money and combine that into their pool to invest?



Obviously the companies have their own investment teams, lawyers, etc., but I have a concern with anybody investing my money in an investment (e.g., sub-prime loans) whom doesn't have an established track record and can offer some sort of guarantee. It sounds like the minimum return solves one of those issues, but what about the others. As a prospective annuity buyer, would I be able to receive reports on the consumers track record, management team, credentials, etc.?



I see annuities being favored by older people interested in preserving their money while reducing risk because they don't have to invest the money themselves and pay fees, research companies and investments. The set it and forget it mentality comes to mind regarding annuities. I give XXX amount of my portfolio for an annuity and let it run it's course, while I do whatever I want with the rest of my money.
salpro22
Member
Leave a quick message



Joined: 08 Feb 2007
Posts: 53

Location: Connecticut
22.24 Dollars($)

PostPosted: Fri Apr 25, 2008 9:52 pm   Post subject:   

Hey Gary,



In my last post, I failed to thank you for the kind words

Quote:
A spirited debate with an intelligent person.
Thanks for the benefit of the doubt.



Quote:
Please correct me if WRONG. I want to make sure I understand how this works. Snoopy from MetLife sells 10.7 million policies of whatever form to protect people from the little if in Life.




I would never accuse you of being "wrong" maybe just a little mis-informed. You are not alone; there are literally millions of highly educated, very sophisticated people who haven't a clue when it comes to life insurance fraud. Ironically, I spent a portion of my morning in a rather lengthy tele-conference with officials in the Investigations Division of the CA Dept of Insurance. "We" were learning more about things like Vanishing Premium Fraud and the IRS's Incidental Insurance Rule.



First of all, Snoopy is just a little cartoon dog that hangs around with Charlie Brown and supposedly battles the Red Baron from a post high atop his dog house. I'm absolutely positive that he is not licensed to sell insurance in any state.



There were just over 12,000 licensed agents who were selling insurance instead. These were the people who didn't seem to have the insurance-buying public's best interest in mind when they sold insurance products.



There is no question that 10.7 million people were involved in the MetLife case brought by some guys at Milberg Weiss because that was the number MetLife officials gave us. Just as there were 11.5 million policy owners involved in the Prudential scandal. There were actually a number of big companies that were sued in the 90s for Churning, Twisting, etc.



Secondly, nobody calls Dewey, Cheatum and Howe any longer because they do not exist. They are now called Dewey, Screwum and Howe. Michael Cheatum left the firm a couple years ago and was replaced by Deborah Screwum (formerly of the Lovelace firm in Dallas).



The fee is usually only 33.3% unless the case goes to trial. Very few of these types of cases ever go to trial because the company fears the publicity. In the nearly 15 years I've been investigating life insurance fraud; I've only seen one (1) case go to before a court.



Quote:
But what about the "other" 10,699,987 harmed persons? What happens to them and their polices? Don't they count too?




Yes, they count as much as each of the class reps. By the way, you cannot imagine the extremes most people would go to in order to avoid being a class representative. That's not a place most people would choose to go.



Consider that the other 10,699,987 (your number) are made part of a suit they know nothing about. Most of them, let's say 80%, receive their package from the court and are made aware of their policy's status. Whether they elect to participate, opt out, or forget the whole thing is entirely up to them. In the eyes of the law, they were given the ability to make an informed decision on how they might proceed. When it comes to this notification, I'm with you 100%! I know it's bogus and very few people understand it. I chose to think of all the people who were informed and who were literally saved. These are the policy owners who would have had to cancel their policies because they could not afford the greatly-increased premiums, etc.



I certainly cannot claim that everyone can be helped, but then again, it's really just a numbers game. Those of us in the regulatory business try to help as many people as we can, by whatever means we have available.



In my opinion, the big insurance companies will never operate honestly because they can't afford to. The trick is to try to make sure as few people as possible get "taken."


_________________

Please feel free to go to my website at www.markcolbert.com or, if you have a specific question, you can email me directly. I hope I can answer any questions you might have. If not, I can certainly find an answer right away.
InsInvestigator
Community Consultant
Leave a quick message

InsInvestigator

Joined: 13 Oct 2007
Posts: 624

Location: Central California
41.83 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

    Connection Error: Connection refused