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Reply to I Just Met an Annuity Salesperson with Fuzzy Math     
Old 03-24-2015, 05:09 PM   #1
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I Just Met an Annuity Salesperson with Fuzzy Math I Just Met an Annuity Salesperson with Fuzzy Math
I just met an annuity salesman. He showed me a chart of some variation of the S and P index, without from 1998 to 2013 this index increased in value from $100000 to $190000 The salesman said that this showed a 6% annual return. I looked at his chart and informed him that the return was actually 4.8%. He asked me how I determined the return without a calculator. I explained to him the magic of 72. He started out claiming to have a S and P index annuity product. It turns out the product was 90% of the S and P minus dividends minus one half of one percent. I did a rough calculation in my head and found that his annuity would only yield about 60% of the S and P index. I think these index annuities are a bigger ripoff than variable annuities
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Old 03-24-2015, 05:49 PM   #2
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I Just Met an Annuity Salesperson with Fuzzy Math Re: I Just Met an Annuity Salesperson with Fuzzy Math
Originally Posted by mjbinniland View Post
I think these index annuities are a bigger ripoff than variable annuities
Okay. You win.

Your guy was an idiot though. That's the problem with these indexed products. The requirements to sell them are too low, and they are too complex to just be sold by any yahoo with a license.

I guess the product had a 90% participation rate, with a fee of .5% - probably to cover a living benefit rider... that he probably explained as an actual return, when it's really a step-up of lifetime income benefits. These benefits are never a "walk away with cash" benefit.
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Last edited by DHK; 03-24-2015 at 05:57 PM.
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Old 03-24-2015, 06:02 PM   #3
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I Just Met an Annuity Salesperson with Fuzzy Math
Originally Posted by mjbinniland View Post
I just met an annuity salesman. He showed me a chart of some variation of the S and P index, without from 1998 to 2013 this index increased in value from $100000 to $190000 The salesman said that this showed a 6% annual return. I looked at his chart and informed him that the return was actually 4.8%. He asked me how I determined the return without a calculator. I explained to him the magic of 72. He started out claiming to have a S and P index annuity product. It turns out the product was 90% of the S and P minus dividends minus one half of one percent. I did a rough calculation in my head and found that his annuity would only yield about 60% of the S and P index. I think these index annuities are a bigger ripoff than variable annuities
So he showed you a product that returns 60% of the S&P 500 without a decrease in your account value on market declines and that is a big rip off... Tell me that half a percent amount was it a fee or part of a spread that only decreases interest earned and does not cost anything in years when the market is down. Finally this type of product is designed to compete with other safe products such as CDs and regular fixed annuities.
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Old 03-24-2015, 07:11 PM   #4
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I Just Met an Annuity Salesperson with Fuzzy Math
Originally Posted by mjbinniland View Post
I just met an annuity salesman. He showed me a chart of some variation of the S and P index, without from 1998 to 2013 this index increased in value from $100000 to $190000 The salesman said that this showed a 6% annual return. I looked at his chart and informed him that the return was actually 4.8%. He asked me how I determined the return without a calculator. I explained to him the magic of 72. He started out claiming to have a S and P index annuity product. It turns out the product was 90% of the S and P minus dividends minus one half of one percent. I did a rough calculation in my head and found that his annuity would only yield about 60% of the S and P index. I think these index annuities are a bigger ripoff than variable annuities
Actually it's not 6% nor 4.8%. If it's from the beginning of 1998 to the end of 2013, the annualized rate of return is barely 4%. Even if you used the end of 1998 to the end of 2012 it wouldn't be 4.8%. This is based on using your starting value of $100,000 and ending value of $190,000.

Maybe you can explain to us why an index annuity is "more of a ripoff" than a VA. While you're at it, explain why a VA is a ripoff as well.
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Old 03-24-2015, 11:15 PM   #5
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I Just Met an Annuity Salesperson with Fuzzy Math Re: I Just Met an Annuity Salesperson with Fuzzy Math
Originally Posted by mjbinniland View Post
I think these index annuities are a bigger ripoff than variable annuities
If a FIA owner ever expressed this, I'd try to understand their perspective or what the misunderstanding might be. When a non-buyer comments, wtf cares?

Either the annuity salesmen was an idiot (as mentioned by someone), or, more likely, he quickly identified you as a non buying return chaser. People that want these aren't calculating returns and comparing against the market.
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Old 03-25-2015, 08:35 AM   #6
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I Just Met an Annuity Salesperson with Fuzzy Math Re: I Just Met an Annuity Salesperson with Fuzzy Math mjbinniland is the thread starter for: I Just Met an Annuity Salesperson with Fuzzy Math

Originally Posted by Norwayguy View Post
So he showed you a product that returns 60% of the S&P 500 without a decrease in your account value on market declines and that is a big rip off... Tell me that half a percent amount was it a fee or part of a spread that only decreases interest earned and does not cost anything in years when the market is down. Finally this type of product is designed to compete with other safe products such as CDs and regular fixed annuities.
I really do not know the particulars very well, when I explained that the return from his index was 4.8% rather than 6% he closed his leather binder and ended the interview, when I told him that I was planning on becoming an insurance salesman he told me that he made 200 to 300k per year selling annuities throughout Riverside County, California

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Originally Posted by KRobby View Post
If a FIA owner ever expressed this, I'd try to understand their perspective or what the misunderstanding might be. When a non-buyer comments, wtf cares?

Either the annuity salesmen was an idiot (as mentioned by someone), or, more likely, he quickly identified you as a non buying return chaser. People that want these aren't calculating returns and comparing against the market.
At the beginning of the interview I had explained to him that I had just received a $290000 payoff from a first mortgage that I held from some apartments in Arlington Texas, he started off telling me about an index with a 6% yearly return

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Originally Posted by sman View Post
Actually it's not 6% nor 4.8%. If it's from the beginning of 1998 to the end of 2013, the annualized rate of return is barely 4%. Even if you used the end of 1998 to the end of 2012 it wouldn't be 4.8%. This is based on using your starting value of $100,000 and ending value of $190,000.

Maybe you can explain to us why an index annuity is "more of a ripoff" than a VA. While you're at it, explain why a VA is a ripoff as well.
During the presentation the annuity salesman, who called himself a financial planner, had claimed that variable annuities are a ripoff because the insurance companies take their profits up front, I just made a personal observation to myself that this also seemed to be the case with the indexed annuity
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Old 03-25-2015, 10:02 AM   #7
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I Just Met an Annuity Salesperson with Fuzzy Math Re: I Just Met an Annuity Salesperson with Fuzzy Math
Was his name Alan Lewis?

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Originally Posted by mjbinniland View Post
During the presentation the annuity salesman, who called himself a financial planner, had claimed that variable annuities are a ripoff because the insurance companies take their profits up front, I just made a personal observation to myself that this also seemed to be the case with the indexed annuity
He probably said that because he can't sell them. Nothing is a "rip off" if it is a valid financial product. Variable annuities have higher fees (compared to mutual funds), but they still have living benefits and CAN have a decent upside.

For accumulation purposes with a living benefit guarantee, right now you really can't beat a variable annuity. The down side of a variable annuity are the fees and the lack of downside principal protection.


But yeah, I stand by my previous comment: the guy was an idiot. You can't put down other products and expect yours to be seen as the "saving grace" product. You can have an intelligent conversation about them, pointing out the pros and cons, but you can't just say that something is a rip-off and then say that "yours is the greatest".
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Old 03-25-2015, 10:05 AM   #8
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I Just Met an Annuity Salesperson with Fuzzy Math Re: I Just Met an Annuity Salesperson with Fuzzy Math
Originally Posted by mjbinniland View Post
I really do not know the particulars very well, when I explained that the return from his index was 4.8% rather than 6%
You're still wrong on your calculation of the return.

Originally Posted by mjbinniland View Post
During the presentation the annuity salesman, who called himself a financial planner, had claimed that variable annuities are a ripoff because the insurance companies take their profits up front, I just made a personal observation to myself that this also seemed to be the case with the indexed annuity
Let me get this straight, by the way you've talked you think this guy is an idiot. And now you're saying because he said a VA is a ripoff that you believe it? Why would you believe what this guy had to say about a VA if you don't believe the other stuff he has said? And you obviously don't understand the index annuity and because of that you claim it to be a ripoff as well.

I'm not here to try to convince you otherwise. I'm just observing your very interesting thought process.
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Old 03-25-2015, 10:23 AM   #9
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Originally Posted by sman View Post
You're still wrong on your calculation of the return.



Let me get this straight, by the way you've talked you think this guy is an idiot. And now you're saying because he said a VA is a ripoff that you believe it? Why would you believe what this guy had to say about a VA if you don't believe the other stuff he has said? And you obviously don't understand the index annuity and because of that you claim it to be a ripoff as well.

I'm not here to try to convince you otherwise. I'm just observing your very interesting thought process.
I never claimed that a variable was a ripoff. The agent who was selling the annuity claimed that variable annuities were a ripoff. I observed that his math was fuzzy, however I never claimed that he was an idiot. I did not "calculate" the exact return. I just pointed out to the agent that his claim of a 6% return were faulty.I had a first mortgage of $288000 pay off. I had been receiving $1320 per month interest only on that investment. I was looking for an investment to replace this.
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Old 03-25-2015, 10:54 AM   #10
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I Just Met an Annuity Salesperson with Fuzzy Math Re: I Just Met an Annuity Salesperson with Fuzzy Math
Originally Posted by mjbinniland View Post
I never claimed that a variable was a ripoff. The agent who was selling the annuity claimed that variable annuities were a ripoff. I observed that his math was fuzzy, however I never claimed that he was an idiot. I did not "calculate" the exact return. I just pointed out to the agent that his claim of a 6% return were faulty.I had a first mortgage of $288000 pay off. I had been receiving $1320 per month interest only on that investment. I was looking for an investment to replace this.
This is the last line of your original post: " I think these index annuities are a bigger ripoff than variable annuities."

It was DHK that called the guy an idiot.
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