I have an annuity ( I know, I know) and my new advisor is suggesting I flip over to one of these plans. Lower fees and no more than 10% loss in any year but gains are also capped. I’m not sure at what level. His internet was down while I was there. I can’t touch it for three years but then am guaranteed $1000/month for life. I’m a healthy 64 and have a pension. I work full time and was considering collecting SS and cutting back on my hours. Our house will be paid off in two years. I know there are many more factors to consider but are these plans legit or would I be repeating my initial annuity investment mistake?
How is this “guaranteed income for life plan” different from an annuity?
(BTW, it might worth asking the advisor what commissions or fees are involved. In particular, how much money does he/she make if you decide to make this change?)
What was that mistake?
Also, do you need a guaranteed $1000 a month for life to cover the bills, or are you looking at spending money? I’m considering a number of these options now because despite her plans, I suspect my wife can’t continue working forever.
Other than annuities and pensions, what other animal is there that guarantees income for life?
A goose that lays golden eggs, duh.
Nit: Said goose only guarantees income for its life, not yours.
That depends on how many the goose lays.
150 cu. cm
Weight 2898 grams
Gold price 55.01/gm
$159,418.98 per egg
This definitely sounds like a scheme to re-label an annuity as something else so that the broker can cash in a commission on a new sale.
I would be very, very wary of this.
FWIW, there’s a lot of scammy annuity companies out there. A lot. But TIAA is quite respectable and I highly recommend them if one wanted to do this sort of thing.
For my annuity, the actual “interest” payout has been about twice the guaranteed minimum payout. You don’t see a lot of that.
I’d be wary of a salesperson that can’t answer questions because their internet was down.
I guess it depends on the initial investment amount. $1000/mo for life with an initial investment of $100k is pretty good. With an initial investment of $300K not so good.
I’m not so sure I’d be betting against the insurance company that holds my nest egg. Guaranteed income sounds great but you have to pay for riders to secure certain benefits like a death benefit for your heirs.
I’m not crazy about the idea of not having access to funds if my circumstances change. Though I guess you could buy a rider to ensure that happens.
The fact that your new advisor was advising you while his internet was down ( preventing him from looking up fees or printing out options for you?) would instantly make me wary.
There’s so much going on with annuities, commissions, payouts deferred and otherwise, riders, caps, it’s all so confusing.
Don’t rush your decision.
And relevant here. The first consideration is the creditworthiness of the entity from which you’re buying something that you need to still be paying you in 30 years time. At your age, I would not touch a lifetime annuity from anyone other than the big names - NY Life, Mass Mutual, etc.
Bear in mind also that at 3% inflation the purchasing power of that attractive-sounding guaranteed $1000 will halve in 24 years; at 6% inflation (unlikely, but a foreseeable risk) it will halve in 12 years.
A good rule of thumb is that the more complex the payoff, the higher the hidden fees. And the harder to shop around, because the opaque details make it much more difficult to compare like with like. There is a very high correlation between adding complexity and ripping off retail investors.
It’s impossible without knowing much more extensive details whether this is appropriate or good value, but I’d wager that it’s almost certainly not. You will almost always be better off putting a proportion of your money into a straightforward and transparent fixed income instrument (which can be an annuity from one of the big names), and a proportion into a low-cost stock index fund to protect you from inflation.
The OP hasn’t returned but he said that he already has a pension and will be getting Social Security. So he already has two sources of guaranteed income. If I were in his shoes, I’d have other money in something like an IRA or 401(k) where it has a chance to grow. Because will the pension and Social Security keep up with inflation?