Current Events > What exaxtly are annuities and are they a reliable investment? >_>

(+) Yeah! (+)

*exactly

Most of my investments are in stocks, Roth IRA, pension, and mutual funds (which I should probably convert to index funds honestly...)

But my dad was telling me I should invest in an annuity. But I honestly dont know what it is and his investment advice has always been spotty...

Michael Scott me on this shit. Pretend I'm an 8yo or a 5yo >_> What is it?

Nah, annuities are meh. Especially for a young guy. Really only for old people paranoid about having guaranteed income through a point in time (their death, theirs and a spouses death, etc).

The people making annuities are making more money than what they guarantee you by investing elsewhere.

Annuity is an investment that is bought for a lump some of cash in exchange for a monthly amount in perpetuity. Say you give me 10,000 and I give you 100 a month for life. As an investment it's a way to make sure your money never runs out as can happen with the investments you list. As a good investment, it depends on the cost and your life expectancy.

[LFAQs-redacted-quote]


....well that does work as the answer to almost every question....

lightwarrior78 posted...

Annuity is an investment that is bought for a lump some of cash in exchange for a monthly amount in perpetuity. Say you give me 10,000 and I give you 100 a month for life. As an investment it's a way to make sure your money never runs out as can happen with the investments you list. As a good investment, it depends on the cost and your life expectancy.

Really? That's it? No catch? Is there some kind of risk to this?

I have an annuity but I need cash now!

The risk is that payments are only for your lifespan. In my deal if you die next year, I pocket the difference, but if you live 15 years, I don't make a profit. This isn't a problem if it's just you, but if you have family, you might be better off with cash and investments you can pass to them. That and given plan providers are normal barely legal invenstment companies, payouts you ge these days aren't great.

Ultima_Fury posted...

I have an annuity but I need cash now!

Call J. G.Wentworth! 877 Cash NOW!

lightwarrior78 posted...

The risk is that payments are only for your lifespan. In my deal if you die next year, I pocket the difference, but if you live 15 years, I don't make a profit. This isn't a problem if it's just you, but if you have family, you might be better off with cash and investments you can pass to them. That and given plan providers are normal barely legal invenstment companies, payouts you ge these days aren't great.

I gotcha. Thanks!

HudGard posted...

Nah, annuities are meh. Especially for a young guy. Really only for old people paranoid about having guaranteed income through a point in time (their death, theirs and a spouses death, etc).

The people making annuities are making more money than what they guarantee you by investing elsewhere.

So basically I'd have a better return in traditional investment options?

[LFAQs-redacted-quote]

Clue me in. What's the context? >_>

lightwarrior78 posted...

Annuity is an investment that is bought for a lump some of cash in exchange for a monthly amount in perpetuity. Say you give me 10,000 and I give you 100 a month for life. As an investment it's a way to make sure your money never runs out as can happen with the investments you list. As a good investment, it depends on the cost and your life expectancy.

So earlier the better?

[LFAQs-redacted-quote]

Oh man, I remember that commercial lol. How old is it?

Geez I'm old. The flip phones clued me in a bit but damn

Annuity underwriters are basically insurance underwriters. They will use calculations that will always slightly tip in their favor. You maaaay cause them a loss but overall their entire portfolio is calculated to be profitable.

The point is to minimize risk on your investment, yes you probably will do better in the long term through traditional investments, but youre exchanging that potential for a lower but steady (relatively) low risk income.

How badly does inflation diminish potential returns on annuities in the future? I know with my pension, its big weakness is that it doesn't scale with inflation once I start collecting it.

DKBananaSlamma posted...

Most of my investments are in stocks, Roth IRA, pension, and mutual funds

You're doing good. The advice given in this topic is pretty on-point - if you're young, you want a diversified portfolio of the things you're already invested in.

Also, annuities become worse the more interest rates increase, so anyone who has an annuity during a time of spiraling interest rates is kinda getting hosed.

YoBlazer posted...

Also, annuities become worse the more interest rates increase, so anyone who has an annuity during a time of spiraling interest rates is kinda getting hosed.

interesting