Alt right protests
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19-10-2017, 08:05 AM
RE: Alt right protests
(18-10-2017 03:01 PM)GirlyMan Wrote:  
(18-10-2017 02:33 PM)Stefan Mayerschoff Wrote:  No fees, either at purchase or ongoing. Can never go down in value, and each year any gain is locked in, and that becomes the new baseline that you can never go below.

Illustration on $100K below to give you an example (all numbers imaginary lol):

[Image: gcEC65.jpg]

Basically what you do is narrow your possible range of returns. You give up anything over 5.5% in a bull market in exchange for protection in the bear times. If you had your money in an S&P index fund (where you fully participate in both gains and losses) over the same time, your returns would look like this year to year:

10/18/18 $106,490 +6.49%
10/18/19 $110,537 +3.65%
10/18/20 $102,368 -7.98%
10/18/21 $113,106 +10.49%

Obviously in a sustained bull market you'll do better in the full participation index fund, but people don't realize how much the losses hurt because of percentages. If you lost 30% of $100K, it takes a 42.86% gain (of $70k) to get you back to $100K. For people who are more concerned with preservation of their principle as opposed to chasing double digit returns, this strategy works well.

Why is that called an annuity? My TSP annuities are I give MetLife a bunch of money and they provide me with a monthly income for life. Since I've always assumed I will die prematurely and have carried $1M term insurance for the last 30 years betting against myself (which at 55 is becoming too expensive to be worth it), I ain't giving MetLife my money. What you are describing seems like something else. More like a risk sharing investment. Why do they call that an annuity?

Heh. Common misconception. Most people think of "immediate income annuities" when they hear the term "annuity" (and actually, when you mentioned poor ROI, I should have put 2 and 2 together). Hardly anyone uses or recommends those now, as you lose complete control of all your principle, and without a return of premium guarantee (I won't do one without that), run the risk of not getting it all back as an income stream prior to passing.

But an annuity is any investment contract offered and guaranteed by an insurance company. Deferred annuities allow your principle to grow based on the type of contract, and you have the option later to either annuitize (turn it into lifetime income) or take chunks, or simply leave it to your beneficiaries. There are all kinds of speciality features now, from enhanced death benefits, to income riders, to RMD savers, to long term care protection - it's just a matter of finding what best fits the client's needs.
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