Let's say I know someone who's 78 and has two large CD's coming due this year, both earning around 5% and very concerned about current CD rates. He basically lives off the interest and has no idea what to do.
When I mention the word "annuity" the only thing that pops into his mind is "SCAM!" just from all the bad press seniors have been getting. Any suggestions?
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First of all, ask him if he knows how many banks have gone under this year alone...answer 39. How many people have lost money in an annuity since their existence? ZERO
He is probably worried about FDIC, ask him if he knows how long the FDIC has to repay his cd if his bank goes under...answer 0-99 years. If an insurance company goes under, the state administrator has already made all insurance companies that sell in his state agree to bail out the carrier that goes under. Not that is likely, since the insurance industry is the most highly regulated industry there is. More so that securities. Look at what happened in the Madoff scandal. So, he trusts his life, car, house, and health to insurance companies, but not his money? He really needs an annuity with a guaranteed lifetime income benefit rider...which means the insurance company will guarantee him lifetime income, even if the contract value goes to zero. Hope this helps. I am a wholesaler by the way. good luck!
Let's say I know someone who's 78 and has two large CD's coming due this year, both earning around 5% and very concerned about current CD rates. He basically lives off the interest and has no idea what to do.
When I mention the word "annuity" the only thing that pops into his mind is "SCAM!" just from all the bad press seniors have been getting. Any suggestions?
Where does she bank at? The highest yield I can find for 5 yr jumbo cd is below 3.5 (?) If he only needs interest to live on you could compare some MYGAs, CYAs or a combo of MYGA and SPIA to her CD.
Instead of trying to razzle and dazzle him with MYGA and SPIAs and MVAs, why not try to earn his trust first. Otherwise you could tell him how great all these things are and why he should be doing it, and all he'll be thinking is how slick a scammer you are.
Remember, you're not talking health insurance anymore. Instead of society preaching he should have it, society has been preaching he shouldn't. You're wasting your breath until he believes in your first.
Note, I am assuming you are still trying to show him why he should do an annuity through you, versus having agreed to an annuity and trying to decide exactly what it should look like.
Obviously, you need to refer him to an annuity expert. You are a health insurance agent, and have made that your specialty (not that there is anything wrong with that).
It's like asking your mechanic about how to make a fried rice.
Unlike health insurance, annuities are not a demand product.
Don't be greedy. Send him to a financial expert who can earn his trust in this area, and who knows how to sell annuities.
First of all, ask him if he knows how many banks have gone under this year alone...answer 39. How many people have lost money in an annuity since their existence? ZERO
He is probably worried about FDIC, ask him if he knows how long the FDIC has to repay his cd if his bank goes under...answer 0-99 years. If an insurance company goes under, the state administrator has already made all insurance companies that sell in his state agree to bail out the carrier that goes under. Not that is likely, since the insurance industry is the most highly regulated industry there is. More so that securities. Look at what happened in the Madoff scandal. So, he trusts his life, car, house, and health to insurance companies, but not his money? He really needs an annuity with a guaranteed lifetime income benefit rider...which means the insurance company will guarantee him lifetime income, even if the contract value goes to zero. Hope this helps. I am a wholesaler by the way. good luck!
Caution: This is the type of statements that get people into trouble. They are very misleading.
The FDIC has NEVER taken 99 years to pay. I don't think they have ever taken 99 days.
Madoff was in hedgefunds, which has far fewer requirements (hence why they exist) than most securities. Besides, this was a criminal case, its a bit like agents who have taken annuity money but never delivered the annuity.
People have lost and continue to lose money in annuities every day. Don't believe me? Put $25,000 in an annuity today, take it all out in 6 months. Tell me how much you have.
Don't get me wrong, I understand what you are trying to say, I just groan when I see statements that are used to instill fear or safety, when they are not factual.
Other than that, there isn't near enough details to provide any real advice. What type of income is he looking for? How big were the CD's? What other income does he have? What other assets? How is his health?
Obviously, you need to refer him to an annuity expert. You are a health insurance agent, and have made that your specialty (not that there is anything wrong with that).
It's like asking your mechanic about how to make a fried rice.
Unlike health insurance, annuities are not a demand product.
Don't be greedy. Send him to a financial expert who can earn his trust in this area, and who knows how to sell annuities.
Lol, well I wouldn't handle this particular case since it's my father. I'll have to look for a rock solid annuity professional for some advice.
.....People have lost and continue to lose money in annuities every day. Don't believe me? Put $25,000 in an annuity today, take it all out in 6 months. Tell me how much you have......
Dan
I believe that is a pretty broad statement, Dan. Annuities are meant to be long term retirement investments, not something that one holds for six months. Because of early withdrawal penaties, of course it is possible (and guaranteed to happen) to lose money in an annuity. For an older person, IMO the way to go is an immediate annuity which guarantees that the person cannot outlive the income. It is money hungry agents who do not fully explain the annuity to the prospect and probably do not understand it themselves that create the negative image.
If he is just wanting the interest; then a MYGA or a SPIA could be a good solution. You have to be very careful with SPIA's as the IRR is a crucial point to consider, but most companies do not post these figures.
You could also develop an income ladder for him in 3-5 year increments, which if done correctly can yield even more to your father in the form of a guaranteed income; while still giving him access to his money.
There are also tax consequences and inheritance questions that must be answered.
I do agree with Pad. In knowing that this is your father find a professional in his area that specializes in annuities. I hope this helps.
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Lol at trying to tell a parent about their finances and getting them to listen. I wouldn't even try.
Best thing you can do is screen the agent, and be there to run interference if necessary.
On a side note: if you want advice, feel free to pm. It would be good for you to know which products are competitive, and whether the agent is shaving a point of interest for an extra 1/2% commission.
Originally Posted by insuranceexec
Especiallysince this is your father find a professional in his area that specializes in annuities. I hope this helps.
Last edited by padthaiforlunch : 08-09-2009 at 03:24 AM.
lol at trying to tell a parent about their finances and getting them to listen. I wouldn't even try.
Best thing you can do is screen the agent, and be there to run interference if necessary.
On a side note: if you want advice, feel free to pm. It would be good for you to know which products are competitive, and whether the agent is shaving a point of interest for an extra 1/2% commission.
Pad, are you trying to point out my grammatical mistake of not placing a semi-colon?
What kind of expertise do you need to be able to write a MYGA or CYA for you dad so he can live off the interest (?) Why would you want to line some stranger's pocket with fat commission off your dad's business (?) I must be crooked to think the money should be kept in the family (?)
If you put $50,000 into a 5 year cd and take it out in 6 months how much money do you have. That is a silly comparison someone made above.
An annuity is contract for a period of time. If you take the amount out before then you are going to be penalized. Some have more moving parts than others and different crediting methods so with some even if you took the money out you won't be upside down.
I know AIG has an annuity that pays the client 5% the first year and 3% I think the second and it becomes completely liquid year two but I wouldn't put anybody's money in that company. They have changed their name so many times and good luck getting your money out when your ready.
You really just must understand how annuities are insured and regulated - especially the reserve requirements. The only people badmouthing annuity accounts are the ones trying to sell something else.
Usually when seniors have a better understanding of how annuities work, then they are more willing to listen. Heck, most of the principal is backed by govt treasuries. The govt would have to fail for annuity companies to go bankrupt - which is precisely why annuity accounts survived the Great Depression.
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A.M. Hyers
Hyers and Associates, Inc.
Well, I think he's basically screwed - looking for capital preservation, safety and around a 5% return. Good luck. Pension and social security pays all the bills - interest off his savings gives him him lifestyle he enjoys. However, at 78 he's worried about liquidity in case of a severe health issue.
I told him that for a worst case scenario he could do a reverse mortgage. My father-in-law just completed his reverse mortgage around 6 months ago and is in hog heaven.
Well, I think he's basically screwed - looking for capital preservation, safety and around a 5% return. Good luck. Pension and social security pays all the bills - interest off his savings gives him him lifestyle he enjoys. However, at 78 he's worried about liquidity in case of a severe health issue.
I told him that for a worst case scenario he could do a reverse mortgage. My father-in-law just completed his reverse mortgage around 6 months ago and is in hog heaven.
So he's skeptical about annuities but not reverse mortgages? Haha
You should contact a company that you believe in, one that is financially strong and speak with one of their professionals that has been doing this for many years(you know the types that put on the seminars for their carriers), in most cases if they are in your area they will come out and talk with your father and can help put a plan together, and guess what? All the commission goes to you.
No, I told him in a worst case scenario he could do a reverse mortgage - he personally thinks they're scams....as he thinks basically everything is a scam.
Well, I think he's basically screwed - looking for capital preservation, safety and around a 5% return. Good luck. Pension and social security pays all the bills - interest off his savings gives him him lifestyle he enjoys. However, at 78 he's worried about liquidity in case of a severe health issue.
I told him that for a worst case scenario he could do a reverse mortgage. My father-in-law just completed his reverse mortgage around 6 months ago and is in hog heaven.
Many of the new annuities have accelerated riders on them giving the client access to the money in case of an emergency; such as:
Nursing home rider- Some companies will give you more access to your money, and some will let you have complete access without penalty; once you have been confined to a skilled nursing facility for a set period of time.
Confinement waiver- I have seen contracts with as little as 30 days to as high as 180 days of confinement, that would give the client access to more if not all of their money. Providing that they are either confined to their home or in the hospital.
Terminal Illness rider- If the client is going to die with in a set period of time, then the clients has access to some if not all their account value; should the client be deemed terminally ill.
Please remember that for most of these riders the annuity must be in place for a period of no less than 1 year before the riders become active.
Advice from Annuity Experts
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