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 Posted: Sat Nov 15, 2008 12:09 pm Post subject: Just limping along at 5%. |
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Gary Spicuzza, *SAFE
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GarySpicuzza
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| Posted: Sat Nov 15, 2008 1:36 pm Post subject: |
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Why didn't that puppy make ANY money at all after the first year?  I'm all about not losing money...just don't understand it making zero for five years? THAT doesn't sound good Gary...maybe I missed something
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Lori
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| Posted: Sat Nov 15, 2008 7:05 pm Post subject: |
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I'll try again:
If a client paid $100,000 in premium into the average Fixed Indexed Annuity on September 30th 2003 they had $130,201 on September 30th 2008. (5 years) And they still had $130,201 on October 27th 2008. AND they still had $130,201 today on Saturday, November 15th 2008. (The past 6 weeks.)
During the same time frame (5 years) September 30th 2003 to September 30th 2008. $100,000 invested in a mutual fund index that mirrors the market would have been worth $127,932 on September 30th 2008.
However, just 27 days later, (meaning from September 30th 2008 to October 27th 2008), the mutual fund index that mirrors the market was only worth $93,273.
The client with the Fixed Indexed Annuity had $130,201 on September 30th 2008. And they still had $130,201 on October 27th 2008. AND they still had $130,201 today on Saturday, November 15th 2008.
NOT one penny of gain or principal was lost due to market volatility with the Fixed Indexed Annuity, during the past 6 weeks.
The point of this thread is five (5) years of gain and 7% of principal was lost in just 27 days from Sept 30th 2008 to Oct 27th 2008 in the mutual fund index that mirrors the market.
Please bear in mind that our stock broker competitors who I affectionately refer to as Certified Clueless Clowns laugh in our face about the 2% or 3% GUARANTEED interest that's paid on fixed annuities and pound their chest and proclaim how THAT doesn't even keep up with inflation!
Well, how well does a 27% loss keep up with inflation that now requires a 37.16% gain the following year just to get back what you lost and also requires further risking your money with the day traders paying stocks like a flea market swap meet.
In a nut shell:
$100,000 premium into an average fixed indexed annuity 5 years ago is worth about $130,201 today.
$100,000 invested in a mutual fund index that mirrors the market 5 years ago is now only worth about $93,273 today.
The above is illustrative of capturing "some" of the gains of the market with a fixed indexed annuity while not risking one penny of principal or past gains.
Fixed Indexed Annuities are GUARANTEED future income insurance, they are NOT investments.
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Gary Spicuzza, *SAFE
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GarySpicuzza
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| Posted: Sat Nov 15, 2008 10:04 pm Post subject: |
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Sorry, Gary got about three hours sleep last night (grand daugher had an 'accident' all over Namy's bed AND 'Namy" at 3am and I never did go back to sleep!) | Quote: | | during the past 6 weeks. |
eyes must've been blurhy, I READ 2003, then 'somehow 07, than 08 I know there is no 07 there...  being old, tired, and clearly the wrong glasses on isn't a smart thing for me (no I would not ever sign any important papers that tired!  ) I understand it totally..just mis-read it to read it only made money that first year... geeeeeeeze that's just plain 
(oh wait that's not it at all I made no mis-take, (wink wink) I was trying to give you an avenue to further explain, ya' that's the ticket  )..
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"Never, never be afraid to do what's right, especially if the well being of a person or animal is at stake. Society's punishments are small compared to the wounds we inflict on our soul when we look the other way." Martin Luther King Jr. |
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Lori
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| Posted: Sat Nov 15, 2008 11:11 pm Post subject: |
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| Quote: | | Now let's do some math: |
Yeah, pretty much lost me there. |
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tcope
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| Posted: Sun Nov 16, 2008 12:14 am Post subject: |
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| Quote: | Now let's do some math:
Yeah, pretty much lost me there. |
Okay, I've obviously failed, I'll try again.
Tcope if you invested $100,000 dollars in the market as described above on September 30th 2003 by September 30th 2008 your money would have been grown to $127,932.
But by October 27th 2008 you'd only have $93,273 left due to market volatility which equals a loss of $34,659 dollars.
Expressed as a percent of what you had that equals a 27.09% loss.
The 37.16% represents what type of impossible gain is required during the next year just to break even with that type of loss? Meaning to just get you back to where you were before the market collapsed.
Had that same person put $100,000 into a Fixed Indexed Annuity they would still have their $130,201.
One flawed math concept, that many "think", is if you lose 25% one year, but have a 25% gain the next year you're back even.
That's flawed math.
$100,000 minus 25% = $75,000
$75,000 PLUS 25% = $93,750
$75,000 PLUS 33.34% = $100,000
It takes a 33.34% gain the following year to just break even with a 25% loss.
Please repost if this still isn't clear and I'll try to rephase.
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Gary Spicuzza, *SAFE
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GarySpicuzza
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| Posted: Sun Nov 16, 2008 11:24 pm Post subject: |
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| I actually get this!!!! Never really thought about it but at least I understand it. Your getting 25% back on $75,000 and not the $100,000 you actually started with/ That makes a difference. Kind of dealt wiht this in the retail business. You would have to explain to a customer that eveb though an item was 40% off and then they had a coupon for an additional 10% it didn't equal a fifty percent discount. Say a $20item - 40% = $8...20-8=12-10%($1.20)= $10.80. This is where I think your coming from right? |
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fireyone
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| Posted: Mon Nov 17, 2008 8:54 am Post subject: |
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| As far I'm aware the annuity funds don't start earning immediately after the investment. It grows gradually and more rapidly towards the end of the term. That's is why probably the amount of money remains unchanged after five years. I agree with Gary on the ground that its more important to protect the investment than losing it on risky options. |
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jeorge
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| Posted: Mon Nov 17, 2008 11:19 am Post subject: |
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| Quote: | | As far I'm aware the annuity funds don't start earning immediately after the investment. |
Traditional Fixed Annuities pay the declared interest just like any other interest bearing financial instrument.
Fixed Indexed Annuities calculate the gain, if any, based on whatever outside index was selected and that is credited on an annual basis. Any premium bonus would be credited upon policy issue and if in the fixed strategy the client would get the bonus (10%) PLUS the fixed interest about (3%) for a first year GUARANTEED gain of 13%.
| Quote: | | That's is why probably the amount of money remains unchanged after five years. |
I was going to blame myself for this but I'm sorry, jeorge, you're not reading what was written carefully enough. I know numbers are hard to follow but....September 30th 2000 and THREE to September 30th 2000 and EIGHT is five (5) years.
From September 30th 2000 and EIGHT to October 27th 2000 and EIGHT is 27 days.
The mutual fund index that mirrors the market had 5 years of all its gain and 7% of principal wiped out in just 27days.
During the EXACT same time frame September 30th 2000 and THREE to September 30th 2000 and EIGHT, five (5) years, the Fixed Indexed Annuity on AVERAGE would have grown to $130,201.
Now from September 30th 2000 and EIGHT to October 27th 2000 and EIGHT, 27 days:
The mutual fund index was worth $93,273.
The Fixed Indexed Annuity was worth $130,201.
Fixed Indexed Annuities don't give back gain nor do they risk principal.
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Gary Spicuzza, *SAFE
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GarySpicuzza
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| Posted: Thu Nov 27, 2008 1:02 pm Post subject: |
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Thank you, fireyone.
 
Maybe I should consider a career in the Financial Services Industry!
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Gary Spicuzza, *SAFE
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GarySpicuzza
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| Posted: Thu Nov 27, 2008 1:19 pm Post subject: |
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| Quote: | | Maybe I should consider a career in the Financial Services Industry! |
wow gary what a good idea!
I agree with fire though once you 'dummy' it down a little it does make it much clearer to understand, and i too do appreciate the time (and frustration) that takes...thanks
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"Never, never be afraid to do what's right, especially if the well being of a person or animal is at stake. Society's punishments are small compared to the wounds we inflict on our soul when we look the other way." Martin Luther King Jr. |
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Lori
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| Posted: Thu Jan 01, 2009 8:23 pm Post subject: |
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I would rather put my money in a multi year guarantee annuity paying anywhere from 5 - 6% guaranteed per year, than in an indexed annuity with the hopes of earning 6% if I'm lucky.
Most agents won't do this though, because they don't want to work for 2 - 4% commission when they can get 5 - 10%.
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Victor Suris
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victor27s
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| Posted: Fri Jan 02, 2009 12:10 am Post subject: |
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victor27s wrote:
| Quote: | | I would rather put my money in a multi year guarantee annuity paying anywhere from 5 - 6% guaranteed per year, than in an indexed annuity with the hopes of earning 6% if I'm lucky. |
The annualized average index annuity return for the five years ending 30 September 2008 was 5.57%.
See THIS LINK at the very bottom of the page.
| Quote: | | Most agents won't do this though, because they don't want to work for 2 - 4% commission when they can get 5 - 10%. |
The facts are...REGARDLESS...whether the agent commission was 2%, 10% or something in between...THE CLIENT EARNED, on average 5% to 6% per year.
Remember the operative word above is AVERAGE.
victor27s.... are you aware of the Monthly Point to Point Annual Sum Strategy?
In an up cycle it's hard to beat, see actual statement below:
16.54% is not too bad! With all principal and past gain SAFE and sound.
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Gary Spicuzza, *SAFE
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GarySpicuzza
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| Posted: Fri Jan 02, 2009 12:44 am Post subject: |
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Add up 12 months of S&P index % change and divide by 12. Cap the positive months at x%, no cap on negative months. This strategy has a very high upside potential, but over the long run annual point to points tend to outperform from all the historical data that I have seen. You can always cherry pick certain periods where the monthly cap strategy looks great, but on average it tends to underperform the annual point to point strategy, again this is just based on studies I have seen and historicals I have run.
I'm in the minority among agents on favoring fixed annnuities over indexed annuities. I just feel that when fixed annuity rates are as high as they are now 6%, they are a better option. Now, when they were a low as they were earlier in the year 4%, I preferred the index annuity.
All in all, I think Aviva's index annuities are solid. I WANT TO MAKE IT CLEAR THAT I AM NOT BASHING INDEX ANNUITIES or GARY. Anyone who has an indexed annuity with Aviva, I think is in a good position.
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victor27s
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| Posted: Fri Jan 02, 2009 11:45 am Post subject: |
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Victor, I agree.
The mathematical point I was attempting to make is over a 5 or 10 year period fixed annuities of whatever form will ALL average about the same.
Of course, as we all know, sometimes it's not what you gain that's important it's what you don't lose.
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Gary Spicuzza, *SAFE
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GarySpicuzza
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