Tell me about annuitys

[Anonymous]

Anonymous wrote:

Anonymous wrote:Agree - do a trust instead. There is no such thing as a "good" annuity.

+ 1

There are basically three types of special needs trusts that can be set up not to interfere with the beneficiary's SSI/Medicaid eligibility. Each has its advantages and disadvantages depending on the exact circumstances of the family and beneficiary. A "first-party" special needs trust holds assets that belong to the person with special needs, such as an inheritance or an accident settlement. Any remainder after the person's death goes to the government to repay benefits. A "third-party" special needs trust holds funds belonging to other people who want to help the person with special needs. Parents and other family members set up and fund these "third-party" trusts and the big advantage is that there is no payback requirement after the beneficiary dies and can be used for another family member or donated to charity. The last type is a "pooled" trust set up by a charity that holds funds from many different beneficiaries with special needs. Each beneficiary has their own account and the charity manages the money. After the beneficiary's death, both the government and the charity receive the remainder. Nonprofits like The Arc will manage first- and third-party SN trusts too.

An annuity held inside one of these SN trusts can be appealing because the insurance aspects of the annuity assure a steady income stream for the life of the beneficiary. But as others point out, there are many types of annuities with different levels of financial risk/return and some annuities have lots of hidden fees, commissions, and expenses that can be very difficult to uncover (scam like). The most straight forward kind is a single, fixed, immediate annuity from a highly rated insurance company - one that pays a fixed amount for the life of one beneficiary on a regular basis and begins payment immediately.

[Anonymous]

OP - don't rely only on the advice of DCUM.

Best thing to do is talk to a Fiduciary (fee only advisor). They do not work off commission, and will be upfront with you. Give you the pros and cons.

https://www.napfa.org/find-an-advisor

There are cases where annuities are a good investment to have for certain people - not everyone, but some people.

[Anonymous]

Anonymous wrote:OP - don't rely only on the advice of DCUM.

Best thing to do is talk to a Fiduciary (fee only advisor). They do not work off commission, and will be upfront with you. Give you the pros and cons.

https://www.napfa.org/find-an-advisor

There are cases where annuities are a good investment to have for certain people - not everyone, but some people.

like...??

[Anonymous]

I know of 3 people who have done annuities:
1) An older man who wanted to be a part of a university that offered him very favorable rates. This gave him a fixed income until his death and he got to be a part of the university which he lived close to. A win-win for them both, especially since he had other assets. This was primarily a way to be a part of something he loved in a meaningful way in the last two decades of his life.
2) A woman whose father has Alzheimers and despite her having plenty of other money, and her fiduciary financial planner advice she shouldn't do it, she wanted one for peace of mind. Perhaps because she has plenty of other money she felt she could afford that as a form of peace of mind??
3) A father who feels he can't trust his adult children to spend their inheritance wisely, so he put the money (before his death) in one giant annuity.
To the OP, I agree with others on the trust. However that means there has to be a trustee who will manage for the offspring after OP is gone.

[Anonymous]

I love DCUM. I'm researching Long-Term Care Insurance and all the replies are "it's a waste of money, look into annuities." I look into annuities on DCUM and all the replies are "it's a waste of money, look into other options"

Lesson learned not to look for any informal financial advice from these boards, there clearly is none

[Anonymous]

Anonymous wrote:I love DCUM. I'm researching Long-Term Care Insurance and all the replies are "it's a waste of money, look into annuities." I look into annuities on DCUM and all the replies are "it's a waste of money, look into other options"

Lesson learned not to look for any informal financial advice from these boards, there clearly is none

You started your research with two generally bad ideas and you got two responses saying so. You learned wrong lesson.

[Anonymous]

Simple annuities are great for their purpose. Such investments are not meant to compete with stocks for big returns. Instead, you should view them as a bond alternative that provides a secure stream of income for a designated period or life. There are a lot of people with “just enough” funds to retire, but are scared sh*tless about the next market swoon. These people may be better off taking their bond allocation and making it an annuity while letting their stock portion continue to grow. Besides worry-free income, the annuity allows the investor to consume more early in retirement because they’re not worried about adverse market movements and benefit again if they live past the average mortality, which is used to price the annuity. Annuities see essentially government-secured because of their state insurance fund guarantee. If you compare current simple annuity rates to Treasuries, they’re competitive.

[Anonymous]

Anonymous wrote:Simple annuities are great for their purpose. Such investments are not meant to compete with stocks for big returns. Instead, you should view them as a bond alternative that provides a secure stream of income for a designated period or life. There are a lot of people with “just enough” funds to retire, but are scared sh*tless about the next market swoon. These people may be better off taking their bond allocation and making it an annuity while letting their stock portion continue to grow. Besides worry-free income, the annuity allows the investor to consume more early in retirement because they’re not worried about adverse market movements and benefit again if they live past the average mortality, which is used to price the annuity. Annuities see essentially government-secured because of their state insurance fund guarantee. If you compare current simple annuity rates to Treasuries, they’re competitive.

+1 The knee jerk reaction against annuities is wrong (though the annuity 'industry' has a lot of flaws). I think one of the best ways to use them is if you don't have a pension to look at your social security income and your most basic needs in retirement. If there's a gap, get an immediate annuity that will fill that gap. That way you know no matter what happens to your portfolio you won't be out on the street. Immediate annuities (SPIA mentioned earlier) are not high fee complex products. You can get them through Vanguard. The biggest risk is that you die before you get their full value; their biggest value is if you live longer than they expected you to. Also, like above pp, this 'peace of mind' often frees people to have a little more confidence in investing their portfolios that will grow and beat inflation at least.

[Anonymous]

The fact that you can’t even spell it right tells me they are perfect for you

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP - don't rely only on the advice of DCUM.

Best thing to do is talk to a Fiduciary (fee only advisor). They do not work off commission, and will be upfront with you. Give you the pros and cons.

https://www.napfa.org/find-an-advisor

There are cases where annuities are a good investment to have for certain people - not everyone, but some people.

like...??

Widows who are likely to blow an insurance payout on gambling or shopping.

Lottery winners who are likely to blow the proceeds on more gambling or overall ridiculous expenditures till the money's gone.

That's about all I can think of. Trusts are generally set up for inheritors who will do similar stupid things with a lump of cash that could last a long time.