I agree with some of what you say - there may be a limit on withdrawals, and don’t expect that the amount available at death is the hypothetical $50K - that’s the part that really doesn’t add up, although I suppose with a limit on withdrawals, the company can ensure they turn a profit and still pay out the whole $50K.
However, Jackson National Life is a major company with assets of (according to Wikipedia) almost $300 billion and about 4,800 employees. So I don’t think the endgame is for them to pay themselves and then fold.
It’s tough - my dad seems like he’s made up his mind (not about whether or not to actually invest, but about the details of the annuity) and so I’m tempted to just back out and let him do it. He has plenty of other money available so even if he lost 100% of the money he put in, which I don’t think is the end result, he’ll be more than comfortable for the rest of his life. I’d feel a lot more comfortable if I knew the actual specifics of the product (hence this thread) and could point out the error in his understanding in black-and-white.
According to Investopedia, it seems to fit some of the criteria, and is a product Jackson offers. Specifically, from Investopedia:
They’re typically purchased using a lump sum. My dad said he could invest “once,” i.e., with a lump sum.
Payments can begin immediately.
Buyers can choose how often they want to be paid. Investopedia says payment schedules are typically monthly, quarterly, or annually, but my dad said he could withdraw however much money he wanted whenever he wanted. Maybe this is the error in his thinking. (The paperwork from Jackson about their immediate annuities also lists monthly, quarterly, semiannually, and annually as payment options.)
Investopedia says one drawback is that payments typically end upon the buyer’s death, with the insurance company keeping the remaining balance. However, there are “cash refund annuities,” and Jackson’s own paperwork on immediate annuities says, under “Income Options”:
“Choose to receive payments for the rest of your life with no refund or with an optional cash or installment refund. A refund option guarantees that every dollar of net premium paid into your annuity will be paid to you or your beneficiary.”
I wonder if my dad is overlooking the words “net premium paid” (can someone explain exactly what that means?) as well as that the net premium paid will be paid to you or your beneficiary - I also wonder if he’s overlooking the “you or your beneficiary” and just heard “your beneficiary,” therefore thinking that I will receive the full amount, not the “net premium paid” less whatever he’s already received, which is how I interpret this statement.
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The weird thing is, the Jackson document also pitches the annuity “if there’s a gap between your income needs and the sources of guaranteed income you could use to fund those needs.” My dad has NO gap between his needs and the amount of income / money he has. He has no reason to invest in such an annuity. Geez.
It could be an immediate annuity with a payment guarantee. So, he puts in $50k and gets some income per year until he dies. Normally, an annuity would stop at the time of someone’s death, but they can be set up to continue paying until the full initial premium is paid back.
So, making up numbers, you put in $50k. You get $2.5k/year for life. If you die before the original $50k is paid out (20 years), it will continue to pay to your beneficiaries until the total $50k is paid out.
That type of guarantee will reduce your income level – so if you don’t have that rider, maybe you’ll get $2.7k/year for life, but it stops when you die.
There are plenty of good investment rules and two reliable ones are:
Insurance is not an investment.
Don’t buy anything you don’t understand.
It’s obvious from your description you don’t understand the product. Don’t buy it. If you are relying on your dad’s description of it, it doesn’t seem he understands it well enough to explain it to you so he also should not buy it.
Your explanation sounds vaguely like a poor, woebegotten, misdescription of a variable annuity I will assume this is, in fact, a variable annuity that works like most variable annuities instead of whatever mythical beast you are describing. Variable annuities are complicated. No one can give fully informed advice about a particular annuity based on your description.
Agreed, right up until the end. I would say don’t proceed with this plan at all.
There is not a single product offered by Jackson National Life I would buy. They don’t really promote their products on their website because no one doing informed, independent research into a range of competing products will ever pick their offerings anyways. Why should they post the information on the website? Making the documents readily available would encourage people to share them with their children, accountants, lawyers, etc. before making a decision. When better informed people look at these products, they will recommend that you run screaming from whoever is selling them.
No, their end game is to employ an army of representatives to make a hard sell on a product that even the sellers don’t fully understand which earns massive fees for them and almost nothing for their clients.
OP, if your dad really wants an annuity (fixed or variable) and he understands the benefits well and he wants those particular benefits, he should be able to find all those benefits at lower cost from competing sellers (like Vanguard for variable annuities). There is no reason to buy this product.