Posted: Sat Oct 18, 2008 12:30 pm Post subject: Variable Annuity vs FIXED Annuity
RISKY Variable Annuity vs SAFEFixed Annuity
Gary D. Spicuzza, *SAFE, proudly presents another box rant!
(Safety of Principal) - Fixed Annuity vs Variable Annuity - (Risk of Principal)
The following is an actual case study used with permission from the client.
The linked images at the bottom of this thread are actual pages and statements from her risky "Variable" Annuity.
"Variable" Annuities are per se' unsuitable for Seniors over the age of 60.
Illustrated from August 1999, projected 8 years hypothetically, to August 2007.
This client invested $125,320 of her IRA life savings into one of these "bloated pigs with lip stick" VARIABLE annuity. It grew to $149,519 and then imploded and she LOST $59,917 of her IRA Life Savings when the market collapsed over the past few years. She has only $89,602. left.
At her current age 67 she will NEVER make up her losses.
And how about all those BLOATED FEES charged each and every year totaling 1.64% per year; PLUS a $30 per year "maintenance fee;" PLUS 1.40% for life insurance per year; PLUS 0.25% per year for the Investment Protection RIDER that was added after the client lost almost $60,000!
Those annual fees total 3.29% of the Account Value each AND every year.
Those fees are charged every year whether the contract loses money or not. Did the, stock broker, securities licensed, wheeler dealer day trader communicate that with her until she consciously understood how the contract worked?
Posted below are the impossible market returns she would have to receive AFTER her $60,000 loss (year by year) to equal what a Traditional FIXED annuity @ 5% would have generated from the beginning.
August 1999 projected hypothetically through August 2007.
The math is is very illuminating.
Below is the ACTUAL Policy Information from the Client by which the above illustration was based.
Disclaimer: I have seen Variable Annuities that are actively managed by sharp brokers that have performed extremely well.
However, that is the exception,... not the rule.
The vast majority of ALL annuities sold are by Stock Brokers SELLING risky Variable Annuities while playing with your money like a day trader at a flea market swap meet.
_________________ Gary Spicuzza, *SAFE
Copyright 1956.
No rights reserved.
*Self Appointed Financial Expert
poor thing...I'll bet she's just heart sick...I have the bulk of my mom's money in fixed (guaranteed good rate for three years) annuitys... _________________ **************************************
Life gaurantees a chance NOT a fair shake
**************************************
FIND a way EVERY day to lighten the load of another
**************************************
Gary, thanks a lot for this eye opening incident. I'm terribly sorry for the lady. She should have been warned against the cons of Variable Indexed Annuity programs.
I'd say that the responsibility rests more upon the insurance agents to help their clients with the right decision.
I'd say that the responsibility rests more upon the insurance agents to help their clients with the right decision.
Yes, I agree.
However, one must understand the vast majority of "Insurance Agents" don't sell Variable Annuities because they violate the fundamental aspect of Safety of Principal inherent in ALL annuities EXCEPTVariable Annuities.
Variable Annuities are a stock broker product.
Stock Brokers aren't insurance agents although they had to get an insurance license to be able to sell the infamous bloated pig with lipstick, Variable Annuity.
Quote:
Variable Indexed Annuity programs.
???Hmmmmmm, I've never seen that combination before.???
There's no such thing as a Variable Indexed Annuity.
There are only two types of deferred annuities.
Variable or FIXED.
FIXED only come in two varieties:
Traditional FIXED Annuity
or
FIXED Indexed Annuity
Below is how interest is credited on both types of FIXED annuities.
_________________ Gary Spicuzza, *SAFE
Copyright 1956.
No rights reserved.
*Self Appointed Financial Expert
The two I got for my mom are called 'preferred fixed'' however this is alittle bit of a mis-nomer...the interest rate does change after I think three years...got a pretty high rate gauranteed for this time period then it can go up or down I think no more than 1/2 a point per year with a max of 3 maybe. _________________ **************************************
Life gaurantees a chance NOT a fair shake
**************************************
FIND a way EVERY day to lighten the load of another
**************************************
Posted: Mon Nov 10, 2008 9:02 pm Post subject: Flexible Fixed
Those are also known as Flexible fixed annuities. They are "safer", but the rate flexes or changes with interest rates. You have to watch out, because usually after the initial period the carriers don't pay more than than the minimum guaranteed rate. No bad if you're client is really old...they usually have higher issue ages.
???Hmmmmmm, I've never seen that combination before.??? 
