I need help!! I do not know a lot about annuities.

B

Blessed

Well-known Member
I do not know a lot about annuities. My financial advisor advised this might be a good idea for some of my savings. I was fine with moving money in to a CD. I have had those in the past.

This was a conversation over the phone. I get the paperwork. Reading it over, I see it is not FDIC insured. I see that it is possible that I might only gain .25%, not 5% like I understood. I also did not realize there would be fees involved. They did not disclose all this these things. I also read on the internet that the advisor gets a commission for selling this product.

To say the least, I am concerned about the whole thing. This does not sound like a good move to me. Can some of you help me understand? I am alone, a widow, I have always made the financial decisions for our family since I married but this one is scary. Please provide any input you can give me as I am at a loss what to do.
 

Yes you HAVE TO be careful, knowledgeable about them.
 

Happy Heart said:
Did you know that annuities are the highest commissioned financial product out there? Get a fiduciary instead of a salesperson for financial advice and never buy a financial product from an insurance company.
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Thanks, this person is from my bank who I have been with for over 40 years. That does not mean I should trust them. They have been a good fit for me/us over the years but I just do not feel comfortable with this product once I read the paperwork.
 
Blessed said:
Thanks, this person is from my bank who I have been with for over 40 years. That does not mean I should trust them. They have been a good fit for me/us over the years but I just do not feel comfortable with this product once I read the paperwork.
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Good for you for reading before you signed. (y) Today, the game has changed and it is no longer wise trust your banker, or anyone else with their hand out. Some sales people seem to feel it is their right to transfer your wealth to them just because you/we are old - we aren't stupid but wise. I wish all seniors would be so savvy but for some it is getting harder to understand the new way of doing things.
 
Happy Heart said:
Good for you for reading before you signed. (y) Today, the game has changed and it is no longer wise trust your banker, or anyone else with their hand out. Some sales people seem to feel it is their right to transfer your wealth to them just because you/we are old - we aren't stupid but wise. I wish all seniors would be so savvy but for some it is getting harder to understand the new way of doing things.
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Thanks, I always try to be careful with any contract I do not fully understand. The days of trust are over, I hate to say. We must always be vigilant to protect ourselves. They are way too many that are willing to take advandtage of us. I am so grateful to have all of you to give me advice!! I think there are way to many that will easily convince us to accept their advice. Little do they know, we are not fools, we will always read the fine print. We did not get where we are without being careful with our financial decisions.
 
I have 4 annuities with Prudential, and am happy with all of them. Two of them are "Guaranteed Lifetime Annuities", which means i can draw from each one of them once a year without any penalty. It is called an "Annual Income Amount", and they will tell you how much it is based on how much you initially put in, and your age. So you can draw that for the rest of your life. Also, if you have the right type, your beneficiary will get the remainder of the initial amount that you put in, minus what you have drawn out.
The other two that I have are not "Guaranteed Lifetime Annuities", so I can draw from them whenever I want, and the balance that is there will be reduced by that much.
As for the rate of return, it is tied to the stock market, so the value of the annuity may go up or down, depending on the market, but if it's a guaranteed lifetime one, you're going to get the same amount every year no matter what. It's just the overall value that changes.
On the guaranteed ones, you will get an anniversary date, and the yearly draw that you do should be after that date to avoid any penalty. You can also set it up to automatically pay out on a certain date (After the anniversary), and you can set it up for a direct deposit to your bank.
As for whether it's better than other investments is a subjective viewpoint. You might get a better return by some other investment, but it may depend on how it does. At least here, I know I can count on a certain amount every year, so I guess that's the trade-off. Peace of mind.
I suppose if you have a good fund manager, and decide on stock / bond portfolio instead of annuities, you will probably do fine over the long haul just as well. Just make sure you choose a reputable company like J.P. Morgan, which is tied to Schwab, and arrange a sit down with the financial advisor to go over your particular situation so it will be tailored to your need.
 
The only thing I've read that sticks is that one must never choose a variable rate annuity and must choose a company that's big enough and well known enough that it's less likely to go out of business. With the Fed set to raise rates again, you might to best to stick with your CDs. I get a pension so I never needed to seriously check out annuities but based on what you posted, I'd bypass on that one for sure.
 
Blessed said:
I do not know a lot about annuities. My financial advisor advised this might be a good idea for some of my savings. I was fine with moving money in to a CD. I have had those in the past.

This was a conversation over the phone. I get the paperwork. Reading it over, I see it is not FDIC insured. I see that it is possible that I might only gain .25%, not 5% like I understood. I also did not realize there would be fees involved. They did not disclose all this these things. I also read on the internet that the advisor gets a commission for selling this product.

To say the least, I am concerned about the whole thing. This does not sound like a good move to me. Can some of you help me understand? I am alone, a widow, I have always made the financial decisions for our family since I married but this one is scary. Please provide any input you can give me as I am at a loss what to do.
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Do you have a citizens advice centre as we do here in the UK? Get their or equivalent free advice. Do not pay any financial advisor or allow anyone to re-invest your funds. I know it's scary, but stay calm and get proper secure advice. Turn to a proper organisation that helps the bereaved. Good luck, you can do this.
 
Rose65 said:
Do you have a citizens advice centre as we do here in the UK? Get their or equivalent free advice. Do not pay any financial advisor or allow anyone to re-invest your funds. I know it's scary, but stay calm and get proper secure advice. Turn to a proper organisation that helps the bereaved. Good luck, you can do this.
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How are you supposed to get financial advice w/out paying for it? There is no free lunch.


The distinction is how the advisor is paid. "Advisors" paid by commission on sales of products they recommend are to be avoided, imho. Those folks only have the responsibility of putting money in their pocket and are legally NOT required to have your best interests in mind. Other advisors paid by the hour or other means are known as fiduciaries must have YOUR best interests in mind.

While it's possible to find commission sales people that DO have your best interests in mind, it's not likely and vice versa w fiduciaries. As stated above unless you understand the product inside and out it's best avoided, if for no other reason than peace of mind.

PS I sold produce on commission for a living. My wife was an actuary and worked for an insurance company that sold annuities. Any time a customer happened to get the better end of the deal they would try to end the policy by buying them out. We don't own any annuities and the thought never crossed our minds.
 
My late father was a banker his whole life. He advised me to not use a bank or banker to make investments, except for a simple savings account to hold extra funds that you use for emergencies or saving up to spend on something.

That being said, I dislike annuities for all the reasons noted above. I like a diversified portfolio, but it doesn't include annuities. Since I am retired, I avoid most risk, more than I did when I was younger.

Stocks and Bonds, Municipal Bonds, Treasury Securities (i.e. TIPS), and some Real Estate Investment Trusts (can be risky so do your research)

Good luck
 
Timewise 60+ said:
My late father was a banker his whole life. He advised me to not use a bank or banker to make investments, except for a simple savings account to hold extra funds that you use for emergencies or saving up to spend on something.

That being said, I dislike annuities for all the reasons noted above. I like a diversified portfolio, but it doesn't include annuities. Since I am retired, I avoid most risk, more than I did when I was younger.

Stocks and Bonds, Municipal Bonds, Treasury Securities (i.e. TIPS), and some Real Estate Investment Trusts (can be risky so do your research)

Good luck
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That makes sense. I was looking at moving money around for a while. I pulled out of the market early in the Covid situation after I lost about 40K.
I was looking for something to get my money earning some interest now that rates are up. I am still not happy in the market.

The thing is my advisor did not mention it was an annuity. I did not discover this until I received the paperwork. I read over the contract and it does not seem the right thing to do. I am not going to do it.

I do have money in a federal account due to my deceased husbands job. I have also moved that to a safer investment. It is still earning money.

Thanks for your input. It means a lot to have help.
 
againstthegrain said:
How are you supposed to get financial advice w/out paying for it? There is no free lunch.


The distinction is how the advisor is paid. "Advisors" paid by commission on sales of products they recommend are to be avoided, imho. Those folks only have the responsibility of putting money in their pocket and are legally NOT required to have your best interests in mind. Other advisors paid by the hour or other means are known as fiduciaries must have YOUR best interests in mind.

While it's possible to find commission sales people that DO have your best interests in mind, it's not likely and vice versa w fiduciaries. As stated above unless you understand the product inside and out it's best avoided, if for no other reason than peace of mind.

PS I sold produce on commission for a living. My wife was an actuary and worked for an insurance company that sold annuities. Any time a customer happened to get the better end of the deal they would try to end the policy by buying them out. We don't own any annuities and the thought never crossed our minds.
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Thanks for sharing, I did not know she, my advisor was talking about` an annuity until I got the paperwork. Now, I feel like she was trying to take advantage of me. I am not falling for it.
 
@Blessed
I am not able to read this entire interesting thread, today,
but I do care about you and understand how confusing these types of decisions are. The info from people and from the details on paperwork, are daunting to fully comprehend.

Do I understand correctly that you were considering it, but have not done it?
(rather than that you did it with some of your savings and now, have concern?)

I also wanted to add, that if you "don't feel comfortable with it," then I consider that enough reason to not do it.
 
It sounds like most of your confusion is in trying to choose the right path for your investments. However, it's important to know that there is no choice that is right for everyone, because there are too many variables that might alter the choice. Your age, risk tolerance, tax consequences, ongoing financial needs, are you a hands-on money manager, etc...
Yes, you could manage your own portfolio of mutual funds, bonds, t-bills, stocks, etc... but are you willing to put in the work and manage it regularly, or do you want someone else to do it, and sacrifice the commission (Usually around 2 to 4%)
You could choose to go with low-risk assets such as CD's, T-bills, and bonds without much trouble in exchange for a lower return.

Currently I have 2 guaranteed lifetime annuities (Each one has a balance of about $13,000), and I get an annual check of $3,400 from each one till the day I die. When it is set up, they use an expected lifetime to base it on, so after 4 more years I will be living on their money. My health is excellent for my age, so I may live to be 100, in which case, it's going to be a sweet deal for me, and a bad deal for them. but again, it's not for everyone because of other considerations. Again there is no "One size fits all".
 
Kaila said:
@Blessed
I am not able to read this entire interesting thread, today,
but I do care about you and understand how confusing these types of decisions are. The info from people and from the details on paperwork, are daunting to fully comprehend.

Do I understand correctly that you were considering it, but have not done it?
(rather than that you did it with some of your savings and now, have concern?)

I also wanted to add, that if you "don't feel comfortable with it," then I consider that enough reason to not do it.
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Thank you Kalia, You are right, I was going over the paperwork. It just did not sound like a good idea. My advisor never said the word annuity when we were discussing my accounts. I was shocked and confused when I received the paperwork. I will not be doing this.
 

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