[quote=anonymous]

They'd be better off buying a bunch of matchbox cars and California Raisins..

Please explain.  I have no clue as to what you are trying to say.

[/quote]

What I am saying is that a Guarantted Double in 20 years is not that good, if that is what you were implying.

Assuming an 11% return or so...You should have grown your money EIGHT-fold in 20 years.

$50,000 should be $400,000

Guaranteeting a 20 year double...you'd be better off buying a bunch of antiques and collectibles for your portfolio.

[quote=FreeLunch][quote=anonymous]

They'd be better off buying a bunch of matchbox cars and California Raisins..

Please explain.  I have no clue as to what you are trying to say.

[/quote]

What I am saying is that a Guarantted Double in 20 years is not that good, if that is what you were implying.

Assuming an 11% return or so...You should have grown your money EIGHT-fold in 20 years.

$50,000 should be $400,000

Guaranteeting a 20 year double...you'd be better off buying a bunch of antiques and collectibles for your portfolio.

[/quote]

Or a big slug of 20y Treasury bonds, which have guarantee'd return of  4.9% pa *and* 100% return of premium at the end of the contract.

I just love these government fixed annuities.

I am implying that that a guaranteed double AS A WORST CASE SCENARIO  is good.  This is especially true because of how it impacts investor performance.

[quote=anonymous]

I am implying that that a guaranteed double AS A WORST CASE SCENARIO  is good.  This is especially true because of how it impacts investor performance.

[/quote]

Please don't think I am not knocking what you are saying - I am just saying that for Younger People, maybe we shouldn't be talking about a Worst Case Scenario?

I would think that a worst case scenario of a well-balanced investment portfolio outside of an annuity would be 6-7% annual return over a 20 year period......Which is a Triple

YOUNG people, for the most part, should be told and informed about what is really the best thing to do.  That's what we're here for.

Or a big slug of 20y Treasury bonds, which have guarantee'd return of  4.9% pa *and* 100% return of premium at the end of the contract.

How does this have any bearing on whether it makes sense to put a guarantee on equity investments?

[quote=AllREIT] [quote=FreeLunch][quote=anonymous]

They'd be better off buying a bunch of matchbox cars and California Raisins..

Please explain.  I have no clue as to what you are trying to say.

[/quote]

What I am saying is that a Guarantted Double in 20 years is not that good, if that is what you were implying.

Assuming an 11% return or so...You should have grown your money EIGHT-fold in 20 years.

$50,000 should be $400,000

Guaranteeting a 20 year double...you'd be better off buying a bunch of antiques and collectibles for your portfolio.

[/quote]

Or a big slug of 20y Treasury bonds, which have guarantee'd return of  4.9% pa *and* 100% return of premium at the end of the contract.

I just love these government fixed annuities.

[/quote]

You just got done saying that you're worst case scenario was a loss of 50% (its not me, just the markets).  Some clients may be OK taking off 1% of the "potential" gain in order to lock in a positive minimum rate of return.  Do we expose ourselves to any liability by not informing clients of this option?

[quote=FreeLunch][quote=anonymous]

I am implying that that a guaranteed double AS A WORST CASE SCENARIO  is good.  This is especially true because of how it impacts investor performance.

[/quote]

Please don't think I am not knocking what you are saying - I am just saying that for Younger People, maybe we shouldn't be talking about a Worst Case Scenario?

I would think that a worst case scenario of a well-balanced investment portfolio outside of an annuity would be 6-7% annual return over a 20 year period......Which is a Triple

YOUNG people, for the most part, should be told and informed about what is really the best thing to do.  That's what we're here for.

 [/quote]

FL-

No offense-just a thought for your consideration-the fact that you think you do not need to consider the implications of a "worst case" correction on a young client tells me that you have not yet personally  experienced a bear market of 'worst case' magnitude.

Yes you can and should generally be more aggressive for younger clients.  But, if the market really takes a hit and they reach their pain threshold, they're going to become irrational and pull the 'eject' handle.  This usually happens near the market bottom, so now they're selling out at low prices.  They often take that money and invest it somewhere else at peak-ish prices.  Think Florida real estate or US Government bonds in 2002.

Free Lunch,

For me, deferred annuities are primarily used to help control investor behavior.   The client may know that they are making a long term investment and that it should be in equities.  They also know that when the market goes down, it is a bad time to get out of equities.  That doesn't stop them from bailing when the market goes down.   The guarantee of the annuity keeps the client invested which, in turn, increases returns.

I seldom use an annuity for younger people, thus I seldom use the 20 year.  I usually use a 10 year 0% GMAB.   The vast majority of my VA sales are qualified money where the guarantee influences investor behavior. 

That's a good point, Joe.

And you are right about not experiencing a Bear Market for my clients, as I have only been in business during a great market.

I have adopted one thing when I talk to my younger clients, I always say something like this,

"Over the next ten years, we are probably going to have a VERY painful market at some point.  Maybe lost 15-20% in a year.  Are you going to be able to handle that and stick to the plan?"

Of course they say yes, but I guess when it comes to money their opinions about a so called "plan" can drastically change.  But I guess, if the relationship is THERE, then they trust you as long as you keep calling them and keep them informed about what's going on.

I tell people buying low is kind of like When you had to eat vegetables as a kid - you hate doing it, and it tastes bad, but you know its good for you and its what your being told to do by someone who is looking out for your best interests.

[quote=FreeLunch][quote=anonymous]

I am implying that that a guaranteed double AS A WORST CASE SCENARIO  is good.  This is especially true because of how it impacts investor performance.

[/quote]

Please don't think I am not knocking what you are saying - I am just saying that for Younger People, maybe we shouldn't be talking about a Worst Case Scenario?

I would think that a worst case scenario of a well-balanced investment portfolio outside of an annuity would be 6-7% annual return over a 20 year period......Which is a Triple

YOUNG people, for the most part, should be told and informed about what is really the best thing to do.  That's what we're here for.

[/quote]

So a well balanced portfolio lowered your return by 4 -5%, and this is still what you "think" is the worst case.  Can you guarantee that? Why not invest 100% equities with an insurance company guarantee for an additional 1%.   If the markets are even reasonably good, the bonds are dragging your balanced portfolio down more than that. 

On the Record? I can't guarantee that, no.

I'm not sure what your arguement is, and I am confident that The Bonds along with dividend stocks are going to be very beneficial in a down or flat market.........which is inevitable over a 20 year time frame.

Insurance Companies guarantee.  THEY guarantee.  The government doesn't guarantee that. 

Define guarantee.  I'm not trying to open up a whole new can of worms, I'm just playing the devils advocate.

Convince me that an insurance company HAS a ONE HUNDRED percent without a doubt guarantee.

deekay - you say a VA will help with principal protection.

That's generally only for Income Purposes & Death Benefit

Isn't that generally the reason people buy annuities?

I'm going to throw in the towel on the annuities.

You guys that use them MORE than me - and the partial reason is that I am not SOLD on them.  I guess that's what It boils down to.

I am knowledgeable, but probably not as knowledgeable, so I apologize if I have made some ridiculous claims....

Just sell 'em right.

[quote=FreeLunch]

I'm going to throw in the towel on the annuities.

You guys that use them MORE than me - and the partial reason is that I am not SOLD on them.  I guess that's what It boils down to.

I am knowledgeable, but probably not as knowledgeable, so I apologize if I have made some ridiculous claims....

Just sell 'em right.

[/quote]

 Congratulations on thinking for yourself, and reaching the " liberation point."

You thought it through for yourself but do not condemn that in which you do not believe, or specialize, or do not have any particular knowledge that creates a comparative advantage.

Myself, I mainly focus on cash stocks and bonds, and a little insurance,  and leave all the other bs. I challenge anyone here to be a better planner.

Having said that, who am I to say that Bobby's clients are not receiving an excellent total planning proposition? What do I really know about their situation - I still have my own preferences for my own clients.

For me, the liberation point is embracing all as colleagues - especially those who have not structurally eliminated choices for their clients.

And the "dumb" annuities - especially immediate annuities - are becoming more important as a generation of low savers retires. We will need the expertise and experience of our annuity expert colleagues to continue to offer realistic choices, continuing to be fully licensed might not be a bad idea, either. As for that, we'll see how the industry continues to shake out over the next couple of years.

[quote=FreeLunch]

On the Record? I can't guarantee that, no.

I'm not sure what your arguement is, and I am confident that The Bonds along with dividend stocks are going to be very beneficial in a down or flat market.........which is inevitable over a 20 year time frame.  I'm addressing the argument that VAs are expensive.  If equities have potential to make 10% and bonds have potential to make 5%, then any more than 20% bonds will cause a balanced portfolio to underperform a VA portfolio of 100% equities (assuming an extra 1% in fees).

Insurance Companies guarantee.  THEY guarantee.  The government doesn't guarantee that. 

Define guarantee.  I'm not trying to open up a whole new can of worms, I'm just playing the devils advocate.

Convince me that an insurance company HAS a ONE HUNDRED percent without a doubt guarantee.

Yes it is the insurance companies guarantee, and they can go bankrupt.  However, that doesn't stop me from getting homeowners, auto, and life insurance.  It may not be absolutely certain, but its the best we can get.  I may even take that over a government guarantee, since the government knows they don't have enough money and keeps making promises.

[/quote]

Glad to see you are open minded enough to not condemn other approaches, even if you are not fully convinced.  There's more than one way to achieve clients goals, and yet no approach is completely guaranteed.

The Government can Tax.

Honestly,

I think the only guarantee is that there IS NO guarantee.

There is no freelunch.  lol

[quote=anonymous]

deekay - you say a VA will help with principal protection.

That's generally only for Income Purposes & Death Benefit.

Incorrect.  GMABs are all about principal protection.  I like them more than GMIB benefits because they are a more honest benefit (ie. none of the bullsh*t 5% that GMIB's give)

Personally, I tend to use a 10 year 0% GMAB.  This can be reset every year.  For younger people a 20 year guaranteed double is a good one to use.  I think that this works out to about 3.2%.

[/quote]

anon, I know there's a few VA's with a shorter GMAB benefit (return of principal minus fees in 5, 7, or 10 years).  Any reason why you choose the 10-year model?

And FTR, alot of the GMIBs are pretty poor.  For some reason though, I've heard of one company (can't remember off the top of my head) that offers a true 5% income step up (compounded, that is).  Am I imagining things?

The one that I use is 10 years.  There is no subtracting of fees.   If the time period is shorter, the fee will have to be substantially higher.

Yes, you are imaging things with the GMIB.  The GMIB isn't true simply because they either use lower annuitization rates, an age setback or a combination of both.  This doesn't make the GMIB bad.  It  just makes it not honest to describe it as 5%.