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I came to a conclusion that a Vanguard Variable Annuity might be right for some. If you are 70 yr or older it pays 5% for life and if 65-69 yrs if pays 4.5%. If you buy it at a younger age and don't withdraw until 70 yr old you will get 5% annually guarantee if you buy GLWB (guarantee lifetime benefits insurane-no free lunch but the insurance start when you withdraw your first month, quarterly or yearly-you choose method of payment). Once you start (for example 100,000 X5%= $5000 a yr) You will never get less annually but more if on your anniversay date (for example 110,000 X5%= $5500 annually) You can get more on your anniversay date but not less because you purchase GLWB insurance sponser by TranAmerica Insurance. The percentage is sliding rule from 59-1/2 to 70 yrs. It is like a IRA if you take out before 59-1/2 there is a penalty for early withdraw.

I found this might be this best for me .
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Not really a Vanguard VA - even if they slap their name on it. This is a Transamerica VA sold through Vanguard.

Just an FYI.
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Before Vanguard hooked up with Transamerica and a few other firms, the notorious AIG was Vanguard's sole annuity provider.

http://en.wikipedia.org/wiki/American_International_Group#Fi...

intercst
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"...the notorious AIG..."

There's nothing "notorious" about AIG. American International Group, or AIG, is the largest property and casualty insurer in the United States. AIG is also one of the largest companies in the United States placing 10th on the Fortune 500 list of companies in 2007.

http://www.aig.com/our-90-year-history_3171_437854.html

From the Wiki link posted by intercst.

AIG faced the most difficult financial crisis in its history when a series of events unfolded in late 2008. The insurer had sold credit protection through its London unit in the form of credit default swaps (CDSs) on collateralized debt obligations (CDOs) but they had declined in value. The AIG Financial Products division, headed by Joseph Cassano*, in London, had entered into credit default swaps to insure $441 billion worth of securities originally rated AAA. Of those securities, $57.8 billion were structured debt securities backed by subprime loans. As a result, AIG’s credit rating was downgraded and it was required to post additional collateral with its trading counter-parties, leading to an AIG liquidity crisis that began on September 16, 2008. The United States Federal Reserve Bank stepped in, announcing the creation of a secured credit facility of up to US$85 billion to prevent the company's collapse, enabling AIG to deliver additional collateral to its credit default swap trading partners. The credit facility was secured by the stock in AIG-owned subsidiaries in the form of warrants for a 79.9% equity stake in the company and the right to suspend dividends to previously issued common and preferred stock. The AIG board accepted the terms of the Federal Reserve rescue package that same day, making it the largest government bailout of a private company in U.S. history.

AIG has fully repaid the assistance from the U.S. Government plus a profit.

I'm no AIG apologist, but this company has been in business for over 90 years and has probably done a lot of good for a lot of people during that time. If anyone is notorious, it's Joseph Cassano.

*Cassano sold hundreds of billions of credit protection in the form of CDSs without having to put up any real money as collateral as this form of insurance had been deregulated with the Phil Gramm-sponsored Commodity Futures Modernization Act of 2000, signed by Bill Clinton. Political writer Matt Taibbi nicknamed him "Patient Zero of the global economic meltdown."
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There's nothing "notorious" about AIG. American International Group, or AIG, is the largest property and casualty insurer in the United States. AIG is also one of the largest companies in the United States placing 10th on the Fortune 500 list of companies in 2007...

...I'm no AIG apologist, but this company has been in business for over 90 years and has probably done a lot of good for a lot of people during that time. If anyone is notorious, it's Joseph Cassano.

*Cassano sold hundreds of billions of credit protection in the form of CDSs without having to put up any real money as collateral as this form of insurance had been deregulated with the Phil Gramm-sponsored Commodity Futures Modernization Act of 2000, signed by Bill Clinton. Political writer Matt Taibbi nicknamed him "Patient Zero of the global economic meltdown."


I'm going from memory a little bit here, so some of the details might be a bit off, but the jist is...AIG sold hundreds of billions of dollars on insurance on collateralized debt obligations which in fact turned out to be virtually worthless. These losses far exceeded any reserves AIG possessed, and unchecked may have created and cascading series of worldwide banking failures.

For whatever reason, AIG was unable or unwilling to adequately assess their risk of these obligations. They were insuring complex financial instruments that they did not understand. That should be extremely scary to everyone.

Apparently, AIG's narrative is that one rogue trader named Joseph Cassano was the guilty party. That's even more scary. One guy, completely unchecked, had the ability to blow up the entire company, with repercussions throughout the entire global banking industry. No oversight, no nothing. How many more guys are like that are out there? Zero? Two? A dozen?

Here's the crazy part: After all this, some people are willing to stake their retirements in poorly understood, complex financial instruments controlled by an international insurance company.
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AIG sold hundreds of billions of dollars on insurance on collateralized debt obligations which in fact turned out to be virtually worthless. These losses far exceeded any reserves AIG possessed

Well, not exactly. The collateralized debt obligations exceeded the reserves of THAT DIVISION of AIG, but not the reserves of the entire company. Obviously, the reserves backing the life insurance policies in force could not be accessed to rescue THAT DIVISION of AIG.
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Well, not exactly. The collateralized debt obligations exceeded the reserves of THAT DIVISION of AIG, but not the reserves of the entire company. Obviously, the reserves backing the life insurance policies in force could not be accessed to rescue THAT DIVISION of AIG.

In that case is it pretty awesome the taxpayers backed up THAT DIVISION OF AIG when the rest of AIG wasn't willing to step up to the plate. Why should they? People who actually work for a living paid their blunders.

Since THAT DIVISION OF AIG needs to reach into my wallet because they made stupid and irresponsible decisions, I propose a rule that all AIG executives spend one year in jail for each million dollars of taxpayer dollars they require to keep themselves solvent. I would rather pay taxes to keep criminals in jail than pay taxes to pay for their gambling debts.

Maybe we should take a poll?
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When I saw "notorious AIG" my bull$hit antennae went up, too.

While AIG's management can hardly be without blame, tearing down Glass-Steagall played a crucial role also.

As far as retirements being destroyed, for decades AIG's VALIC division has siphoned billions from teachers and non-profit employees via high priced annuities inside 403B plans.

And it was completely legal.

For the record:

http://www.politifact.com/truth-o-meter/statements/2013/jan/...

MOSTLY TRUE
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How many more guys are like that are out there? Zero? Two? A dozen?


A few at least - as the recent London Whale demonstrates.

Here's the crazy part: After all this, some people are willing to stake their retirements in poorly understood, complex financial instruments controlled by an international insurance company

Not so crazy when you consider that the annuity portion of their business was the most secure, is often backed by state guarantees, and was actually sold by AIG to Western National to help bail out the company - without a single policy default.

Now, none of that makes such a good investment, but it doesn't make it any less safe than investing it in the stock market.
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In that case is it pretty awesome the taxpayers backed up THAT DIVISION OF AIG when the rest of AIG wasn't willing to step up to the plate.

Not "would not." Could not.

Life insurance statutory reserve requirements
http://www.investopedia.com/terms/s/statutory-reserves.asp
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First and foremost insurance companies are filthy rich.It is kind of hard for a insurance salesperson to explain cost of the insurance or gains. Whether it's TransAmerica or AIG, they have to play by Vanguard rules on cost they charge their customers and their lifetime annuity is very attractive.

By the way when AIG came tumbling down, their insurance division was very profitable which was talk of selling that division to cover some of their losses. Anyway insurance annuities or any annuities is by choice. I chose companies that are upfront of their fees and once you buy them sometimes it is hard to get out with high exit fees. FOOL ON!
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I guess you choose who you want to go with and I chose Vanguard Annuity for older sister and she happy with 5.5% annually(monthly,quarterly - you choose how you want to receive it) In fact if you didn't get on this past May the lower the percentage to 5% for those over 70 yrs old. It never goes down but on her anniversary her lump of money intially deposited went up higher on her anniversary date the following year and get got $300 more for life. It never goes down even if market so bad that her account is "0" her annuity never goes down because of GLWB rider.

In fact you choose what Vanguard products for your annuity and they most volatile fund you can get is the Vanguard Balance Fund. If they give me a choice I would go with the most aggresive fund which they don't- Can't you see if they did that and your fund goes up 50% at the anniversay date you tend to get a big lifetime yearly lifetime annuity which never goes down but up.

Even though Transamerica sell it- it's Vanguard Product where transamerica collect the fees (initial and GLWB rider) and administer the payout.
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Here's the crazy part: After all this, some people are willing to stake their retirements in poorly understood, complex financial instruments controlled by an international insurance company.

Ah yes --- but what if they *promise* that your retirement account will never have a year-to-year loss? What need to understand the 200+ page contract when they make that promise right there on the 2-page brochure?
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What need to understand the 200+ page contract when they make that promise right there on the 2-page brochure?

Office of the Inspector General (I believe it is) controls the language and claims in insurance company marketing materials, contracts and illustrations.

Insurance is the most tightly regulated industry in America.
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No, insurance is regulated on a state by state basis.

The OIG has little to do with marketing material et al.

Sure loan reserves reflect liabilities but that has nothing do with selling suitable products.
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Office of the Inspector General (I believe it is) controls the language and claims in insurance company marketing materials, contracts and illustrations.

So??

Sure, they put the disclaimers right out in the open, but it's up to the mark ^h^h^h^h buyer to understand what it all means.

They clearly and openly say that in your IUL dividends are excluded.
It's up to you to know that over the long term, 44% of the return of the S&P500 is due to dividends.
http://personal.fidelity.com/products/funds/content/pdf/real...
"From 1930 to the end of September 2010, dividends represented 44% of the S&P 500 Index’s 9.3% average annual total return."

It's actually worse that that. Note the "44% of the ANNUAL return".

Not total--annual.
In the long term, dividends account for 90% of the TOTAL return.
http://www.gafunds.com/wp-content/uploads/2012/11/imdf_WhyDi...
"If you had invested $100 at the end of 1940, this
would have been worth approximately $174,000 at the end of 2011 if you had reinvested dividends, versus $12,000 if dividends were not included."

That S&P/IUL spreadsheet that's floating around shows the same thing.
$100 invested Feb'50 grows to $60,929 with dividends reinvested but only to $7,697 without dividends. That's 87%.
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No, insurance is regulated on a state by state basis.

The OIG has little to do with marketing material et al.

Sure loan reserves reflect liabilities but that has nothing do with selling suitable products.


What he said.

I'd also add that if one has concerns over the financial stability of insurers, there are various ways one can go about researching that issue.

-synchronicity
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No, insurance is regulated on a state by state basis.

Now that you say that, you're right. Each state has its own requirements, which is why long term care riders aren't generally available in CA.
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They clearly and openly say that in your IUL dividends are excluded.
It's up to you to know that over the long term, 44% of the return of the S&P500 is due to dividends.


Dude.

Wrong thread.

I ignored that entire thread. Don't make this one, which is not about IULs, as bad as that one was.

AIG was a big seller of fixed annuities - which are not the sames VAs, EIAs, or IULs.

Please, let's not start that arguement again in a new thread. I have enough greyed-out posts here already.
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My point is that these are not simple products. They are complex financial products that the insurance companies understand quite well and the customers generally don't. There are plenty of fees and expenses hidden in plain sight -- because the customers don't realize the financial implications of some of the statements.

According to a link that intcst (??) posted, even straightforward SPIA have massive fees that the customers just don't recognise.
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My point is that these are not simple products.

Some are, some are not.

Fixed annuities and SPIA are generally very simple. VAs, EIAs, and other variations are not, to say the least.

This is why fixed annuities SPIAs don't require the same licensing to sell them. They are not as complex and do not require a securities license.

There are plenty of fees and expenses hidden in plain sight

That is simply not true.

According to a link that intcst (??) posted, even straightforward SPIA have massive fees that the customers just don't recognise.

Also not true.

Let me ask you, does a CD have hidden fees? Let's say you bought a one year cd earning .5% and that if you wanted to terminate it early, it would cost you all your interest plus $10.

Where is the hidden fee?

Don't confuse fees with with the spread the institution makes on selling a product.

If you buy a $50,000 fixed annuity and it pays 3% for five years, and it matures in five years, and has a surrender charge schedule that is disclosed to you, there are no hidden fees just because the insurance company might be making 5% off of that $50,000 and only paying you 3%.

The same goes for a SPIA.

Consider it another way:
If a bank A is paying you 1% on your deposits and bank B is paying you 1.5% on your deposits, yet bank A is making 2% while bank B is making 3%, that does not mean that bank B is charging you more in fees.
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Hawkwin writes,

According to a link that intcst (??) posted, even straightforward SPIA have massive fees that the customers just don't recognise.

Also not true.

</snip>


Here's the article.

The high cost of a no-fee, no-commission Single Premium Immediate Annuity (SPIA).
http://retireearlyhomepage.com/annuity_costs.html

</snip>


It's just arithmetic. You calculate the expected present discounted value (EPDV) of the SPIA and compare it to the quote from the insurance company.

I don't care whether you call it a fee, an expense, a commission, a "spread", or a big stick up the behind. It's 20% to 30% of the purchase price that's being skimmed off the top by the insurance company that's not being disclosed.

It interesting to note that if you applied the 15 basis point annual fee of a Vanguard fund over the entire 50 to 60-year life of the annuity pool, it would amount to only about 1.25% of the purchase price. It's very expensive to involve an insurance company in your retirement plans.

intercst
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According to a link that intcst (??) posted, even straightforward SPIA have massive fees that the customers just don't recognise.

Well, basically, what intercst (sp?) is saying that if you calculated the "fair" present value of the annuity stream, it would cost X% less than what the insurance company is charging (or alternatively, that for $Y in an SPIA you "should" get a larger annuity payout annually).

Which is all well and good, but the point of an annuity is that you're shifting mortality risk on to the insurer and away from yourself. There should be a charge for that. Insurance companies are good at measuring risk (well, usually, not always and not all of them, but that's a different story), and as The Joker said "If you're good at something, never do it for free".

I prefer to take the approach of looking at the IRR on a SPIA for each year. With a simple "Life Only" SPIA, if you die in year one the IRR is going to be something horrible like -95% (depending on the amount of the annuity payment, which obviously is greater the older you are when you buy the SPIA). At life expectancy for a 65 year old you might find the IRR to currently be something like 3%, which obviously isn't very good, but maybe it makes sense as a partial replacement for your bond allocation. At age 90 or 95 it might be closer to 5%. Dunno, I'm just making up numbers here and annuity quotes change daily and vary between companies and at different ages and of course you can get ones with "term certain" bits or "premium refund" options or lord only knows what.

In the end, it doesn't matter what the hypothetical price could be, but rather look at what you're getting for what you're paying and decide if it makes sense. Ray, I'm sure you of all people get that logic. The market sets the price, and you decide if you wanna pay it. Only thing I would add is that potential buyer should be told enough to make an informed opinion rather than just "sold" a product.

-synchronicity
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