What are your goals for the annuity....to provide income, or only to increase the lump sum value? How old are you? What is your risk tolerance?
Posted: Wed Sep 16, 2009 09:32 am Post Subject:
.to provide income, or only to increase the lump sum value? How old are you?
...income opportunity to be specific and I'm 26.
Posted: Wed Sep 16, 2009 09:15 pm Post Subject:
A variable annuity is not an appropriate investment for a 26 year old who wants income.
1) Gains come out first and are taxed as income.
2) Gains that come out of the contract before age 59 1/2 are subject to a 10% penalty.
Posted: Thu Sep 17, 2009 06:07 am Post Subject:
I was going through a brochure and the variable annuities seemed to have lucrative offers. What would then be the right age to invest on variable annuities?
Gains that come out of the contract before age 59 1/2 are subject to a 10% penalty.
Any other penalties that come to mind?
Posted: Fri Sep 18, 2009 11:59 am Post Subject:
Well, I guess one important factor that you should focus while purchasing fixed annuity is it's 'guaranteed rate'. But this is not the same with variable annuities.
In order to achieve the product that suits your needs, you may need to go through the entire contract (details) and compare a lot of options.
Steven
Posted: Fri Sep 18, 2009 07:04 pm Post Subject:
That's a broad question. You need to sit down with an agent and discuss your needs and goals. I would not rule out fixed and indexed annuity policies either.
Posted: Sat Sep 19, 2009 07:01 pm Post Subject:
Did you look at the expenses of the variable annuity? The guarantees of the VA make the worst case scenario much better than a comparable mutual fund while the expenses really hurt the upside potential.
Posted: Mon Sep 21, 2009 01:22 pm Post Subject:
The guarantees of the VA make the worst case scenario much better than a comparable mutual fund while the expenses really hurt the upside potential.
It would have been better if you could show me through an example. Mutual funds are risky-no doubt!
But I've heard that the Variable Annuities have their share of risks as well. Pinkfloydfan
Posted: Mon Sep 21, 2009 07:09 pm Post Subject:
Ok. Here's an example. Jim invests $200,000 for 20 years. Let's assume that it's IRA money so that the taxation will be the same for a VA and a mutual fund.
$100,000 goes into a mutual fund. $100,000 goes into a Variable annuity. The VA is invested in the same manner as the mutual fund, but has total expenses that are 2% higher. Assume that the mutual fund gets a 8% return. The VA will get 6%. At the end of 20 years, he has $466,00 in his mutual fund and only $320,000 in the VA. The difference is the impact of the fees.
What if the market does poorly and over the course of 20 years, the value of his MF only increases 1% compounded? He'd have $122,000. In the VA, he would have $200,000*.
*This particular VA guarantees to double in 20 years. The $200,000 can be taken in a lump sum.
Posted: Tue Sep 22, 2009 09:31 am Post Subject:
This particular VA guarantees to double in 20 years.
So, that shows how it can even double under adverse market conditions. Although the return could be lesser if the conditions are favorable for a performing MF, yet it is a lot safer bet. Pinkfloydfan
Posted: Tue Sep 15, 2009 01:28 pm Post Subject:
What are your goals for the annuity....to provide income, or only to increase the lump sum value? How old are you? What is your risk tolerance?
Posted: Wed Sep 16, 2009 09:32 am Post Subject:
.to provide income, or only to increase the lump sum value? How old are you?
...income opportunity to be specific and I'm 26.
Posted: Wed Sep 16, 2009 09:15 pm Post Subject:
A variable annuity is not an appropriate investment for a 26 year old who wants income.
1) Gains come out first and are taxed as income.
2) Gains that come out of the contract before age 59 1/2 are subject to a 10% penalty.
Posted: Thu Sep 17, 2009 06:07 am Post Subject:
I was going through a brochure and the variable annuities seemed to have lucrative offers. What would then be the right age to invest on variable annuities?
Gains that come out of the contract before age 59 1/2 are subject to a 10% penalty.
Any other penalties that come to mind?
Posted: Fri Sep 18, 2009 11:59 am Post Subject:
Well, I guess one important factor that you should focus while purchasing fixed annuity is it's 'guaranteed rate'. But this is not the same with variable annuities.
In order to achieve the product that suits your needs, you may need to go through the entire contract (details) and compare a lot of options.
Steven
Posted: Fri Sep 18, 2009 07:04 pm Post Subject:
That's a broad question. You need to sit down with an agent and discuss your needs and goals. I would not rule out fixed and indexed annuity policies either.
Posted: Sat Sep 19, 2009 07:01 pm Post Subject:
Did you look at the expenses of the variable annuity? The guarantees of the VA make the worst case scenario much better than a comparable mutual fund while the expenses really hurt the upside potential.
Posted: Mon Sep 21, 2009 01:22 pm Post Subject:
The guarantees of the VA make the worst case scenario much better than a comparable mutual fund while the expenses really hurt the upside potential.
It would have been better if you could show me through an example. Mutual funds are risky-no doubt!
But I've heard that the Variable Annuities have their share of risks as well. Pinkfloydfan
Posted: Mon Sep 21, 2009 07:09 pm Post Subject:
Ok. Here's an example. Jim invests $200,000 for 20 years. Let's assume that it's IRA money so that the taxation will be the same for a VA and a mutual fund.
$100,000 goes into a mutual fund. $100,000 goes into a Variable annuity. The VA is invested in the same manner as the mutual fund, but has total expenses that are 2% higher. Assume that the mutual fund gets a 8% return. The VA will get 6%. At the end of 20 years, he has $466,00 in his mutual fund and only $320,000 in the VA. The difference is the impact of the fees.
What if the market does poorly and over the course of 20 years, the value of his MF only increases 1% compounded? He'd have $122,000. In the VA, he would have $200,000*.
*This particular VA guarantees to double in 20 years. The $200,000 can be taken in a lump sum.
Posted: Tue Sep 22, 2009 09:31 am Post Subject:
This particular VA guarantees to double in 20 years.
So, that shows how it can even double under adverse market conditions. Although the return could be lesser if the conditions are favorable for a performing MF, yet it is a lot safer bet. Pinkfloydfan
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