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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 78166  
Subject: Re: Yield in low interest rate environment Date: 7/14/2013 7:55 PM
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ResN writes,

Just so you know, you aren't getting a 4-5% annual return on these annuities. You're getting a payout of 4-5%, which includes principal, which by the way would no longer belong to your parents. The insurance company gets the principal, and your parents get a payout based on 4-5% of the original amount less fees, commissions, and a mortality premium, plus their money vanishes at death.


That's true for any kind of Life Annuity, but insurance companies also sell Period Certain annuities (e.g., ten $10,000 annual payments for a $94,000 up-front premium) Of course, the insurance company could go under before you collect the last payment.

Right now you can get 4% on a term of 10 to 12 years -- about what you'd expect from a Corporate bond.

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