Bogleheads

[nisiprius]

Another thread mentioned longevity insurance... summary appended below.

Has anyone succeeded in reaching an actual agent who knows about The Hartford's "Income Security" product and knows how to give estimates and quotes for it?

Don't want a discussion of the pros and cons... I don't want to reject the idea until I have some details and numbers, though I think in the end I will probably decide against it. But even if it were an intrinsically lackluster product, if there were an option to buy a relatively small amount, say $10,000 worth, just to add a late-life "kicker" to the income stream, I think I'd do it.

I'm getting frustrated.

I've found the product at their website,
http://www.hartfordinvestor.co....2FFullPage
read the sketchy descriptions, and downloaded the brochures, InvFacilityCare.pdf, InvHISFacts.pdf, InvPreparetolive.pdf The brochures have the obligatory pictures of silver-haired yet hot couples smiling and eye-twinkling at each other while riding bicycles on beaches. You just know what's gonna happen when they get back from their ride, don't you?

The Hartford seems to be working quite hard at impeding me from buying. I'm getting what I at this point I can only describe as a runaround.

It has some features which might be gimmicky or might be worthwhile... depending a great deal on how much they cost. Their illustrations include a "return of principal" option, which I don't particularly want unless it's practically free, which it probably is. They don't include any of their complex family of nursing-home-care options--the general theme is that payments can start when you reach the specified age or earlier if you enter a nursing home.

I have LTCI but a little extra couldn't hurt. I suspect it will turn out that these are very expensive options. Also they are at some pains to emphasize that what they are providing is "not LTCI" and I'm not sure what gotchas are hiding behind that phrase.

The Hartford has no direct sales; I have found nobody at the main office who will tell me details first and hand me over to an agent later; they pretend that any of their agents should know all about it and won't refer me to one based on anything but ZIP code. (And that's after the initial runaround. When I asked for information on the "The Hartford Income Security" I was initially transferred to their car insurance department, and the car insurance department... transferred me to their mutual fund department!)

I called the number they gave me at the local A. G. Edwards office (seemed appropriate, Aged Wards, get it?), and got a gruff voice wanting to know "who gave you this number." He was a Wealth Advisory Panjandrum who didn't want to waste time on people that didn't already have big accounts there. (In fact my impression is that the A. G. Edwardses of the world aren't very interested in selling insurance to people who don't have accounts with them). He referred me to someone who was on vacation. That person called me back, but had never even heard of "The Hartford Income Security," asked me what it was, said he'd find out about it and get back to me, called back three days later to say he was still trying and thought he me might be able to tell me more in a week or two!

(Quite a contrast with my experience with both Vanguard and Fidelity so far. The people I've gotten when I called 800-522-5555 or 800-493-3004, respectively, are sharp, seem to know everything about their products and have all the details at the tip of the fingers... Fidelity's rep knew exactly what The Hartford Income Security was, but, alas, said that they offer some of The Hartford's products, but not that one.)

From previous threads:

Someone pointed out that Berkshire Hathaway's EZ-quote page, http://www.brkdirect.com/spia/EZQUOTE.ASP, allows quotations with starting dates in the distant future, thus a very pure form of longevity insurance. Minimum purchase is $40,000, though.

[quote="bob90245"][quote="Bob K."]

[sscritic]

Have you tried an independent insurance agent in your town? As you say, Harford does not have direct sales. If I wanted an insurance product, I wouldn't call A.G. Edwards as my first choice.

If you find an agency that carries The Hartford products, you are probably better off walking in the door and talking face to face with the agent. The agent will have a better sense that there might be a sale in the future and work harder to get the information you want.

[nisiprius]

[tfb]

[RiskAverse]

[nisiprius]

[RiskAverse]

[nisiprius]

[RiskAverse]

[nisiprius]

[Valuethinker]

[mas]

[mw]

I will give you a quote. Contact me so you can provide the information needed to provide a quote.

[Vig Oren]

HOW SAFE IS YOUR INSURER?.

Here is an excerpt from Wall Street Journal (MAR 2006):


“.....................given the long-term nature of these offerings [of selling investments that behave a lot like a pension] -- you're paying a company now for the promise that it will pay you back decades in the future -- investors need to feel comfortable that the company will still be around in 30 or 50 years. "That can be a big 'if,' " says Joseph Belth, professor emeritus for insurance at Indiana University.

Since the start of 1995, 76 life and health insurance companies have gone out of business, according to Weiss Ratings Inc., which tracks and rates insurance companies. While most failures have been at smaller companies, larger firms also sometimes go under. And when an insurer fails, state-run insurance pools step in to fulfill certain obligations, but investors can have accounts frozen and face other significant hassles."

[RiskAverse]

[nisiprius]

[Vig Oren]

Deleted my post for re-editing but there is no Undo to put it back. So it's gone. Also, I don't like the way nisiprius quoted by cherry picking into it and thus scrambling the content. IMO, you either quote as is or not at all.

[Quasimodo]

http://en.wikipedia.org/wiki/Tontine

John
_________________
A beautiful thing is never perfect.

Egyptian proverb

[nisiprius]

[nisiprius]

[Quasimodo]

Nisiprius wrote:

"So, something I never thought about: do the insurance companies send out hit squads after long-lived annuitants?"

That would be unethical. They send agents with brochures instead!

John
_________________
A beautiful thing is never perfect.

Egyptian proverb

[RiskAverse]

[RiskAverse]

[tc101]

I would never do business with Hartford. I had an annuity with them that my father got me when I was a kid. I wanted to move it to Vanguard. Hartford did everything they could to delay that. They lied to me again and again. Eventually I called the state insurance commissioner and they finally moved the money but I would never trust them.

[rschreit]

[quote="nisiprius]Let's say I buy longevity insurance (i.e. an annuity whose first payment is long deferred) at 65 with payments starting at age 85. I am now part of a pool of people who have, wisely or foolishly, all done the same thing. The insurance company puts all our premiums into, let's say, TIPS and waits. Because many of us die off before age 85, the insurance company uses the premiums of many annuitants to pay out to a few annuitants. There is what might be called a multiplier factor, and that factor is the reciprocal of the probability of a 65-year-old surviving to age 85, about 5.7X.

. . . I may be missing something, which is why I say I'll post more when I'm surer of my ground, but I don't see how "investing the money yourself and buy an annuity later" is equivalent to "buy an annuity early" unless you assume that you can obtain a much higher return than the insurance company, or unless you assume that the insurance company is going to make a payout that is much worse than than actuarially fair.

As nearly as I can tell, people seem to keep missing the (unpleasant) point that you can't benefit from the pool of people who die young unless you yourself are in that pool and thus incur the risk of dying young yourself and losing your premium to other annuitants (instead of passing it on to your heirs).

Annuities involve a transfer of funds from the shorter-lived annuitants to the longer-lived annuitants, with the insurance company being trusted to hold the stakes. There's no way for an individual to duplicate this effect by himself.

I think[/quote]

As an actuary, I'd call that a good explanation of how annuities work. Each year that the annuitant survives provides him/her an extra "survival return," (multiplier) on top of the investment return, derived from the other annuitants who didn't survive that year.

But don't forget the ER. Each year the insurer takes out its costs of doing business for admin, marketing, risk-bearing, taxes, profits. Call it "not actuarially fair," or "no free lunch," but the insurer's implicit ER is a fact of life in any form of insurance. That's why you should usually self-insure any risks that you can afford to cover out-of-pocket.

While the annuitant is still fairly young and mortality rates are low (i.e., annual survival rates are high), the ER offsets much of the survival return. So the annuitant isn't getting paid much for taking the risk of not surviving another year and thereby losing his/her investment in the annuity. That's one reason why it may pay to self-insure the early years, up to about age 80 or so, before buying an annuity.

Other reasons for waiting until an advanced age to buy a fixed annuity:

1. You have less reason to be concerned about inflation or insurer solvency, because fewer years of lifespan remain

2. You may have less ability to manage your own investments and be ready to commit some assets to an insurer.

[rschreit]

[quote="nisiprius]Let's say I buy longevity insurance (i.e. an annuity whose first payment is long deferred) at 65 with payments starting at age 85. I am now part of a pool of people who have, wisely or foolishly, all done the same thing. The insurance company puts all our premiums into, let's say, TIPS and waits. Because many of us die off before age 85, the insurance company uses the premiums of many annuitants to pay out to a few annuitants. There is what might be called a multiplier factor, and that factor is the reciprocal of the probability of a 65-year-old surviving to age 85, about 5.7X.

. . . I may be missing something, which is why I say I'll post more when I'm surer of my ground, but I don't see how "investing the money yourself and buy an annuity later" is equivalent to "buy an annuity early" unless you assume that you can obtain a much higher return than the insurance company, or unless you assume that the insurance company is going to make a payout that is much worse than than actuarially fair.

As nearly as I can tell, people seem to keep missing the (unpleasant) point that you can't benefit from the pool of people who die young unless you yourself are in that pool and thus incur the risk of dying young yourself and losing your premium to other annuitants (instead of passing it on to your heirs).

Annuities involve a transfer of funds from the shorter-lived annuitants to the longer-lived annuitants, with the insurance company being trusted to hold the stakes. There's no way for an individual to duplicate this effect by himself.

I think[/quote]

As an actuary, I'd call that a good explanation of how annuities work. Each year that the annuitant survives provides him/her an extra "survival return," (multiplier) on top of the investment return, derived from the other annuitants who didn't survive that year.

But don't forget the ER. Each year the insurer takes out its costs of doing business for admin, marketing, risk-bearing, taxes, profits. Call it "not actuarially fair," or "no free lunch," but the insurer's implicit ER is a fact of life in any form of insurance. That's why you should usually self-insure any risks that you can afford to cover out-of-pocket.

While the annuitant is still fairly young and mortality rates are low (i.e., annual survival rates are high), the ER offsets much of the survival return. So the annuitant isn't getting paid much for taking the risk of not surviving another year and thereby losing his/her investment in the annuity. That's one reason why it may pay to self-insure the early years, up to about age 80 or so, before buying an annuity.

Other reasons for waiting until an advanced age to buy a fixed annuity:

1. You have less reason to be concerned about inflation or insurer solvency, because fewer years of lifespan remain

2. You may have less ability to manage your own investments and be ready to commit some assets to an insurer.

[nisiprius]

[Vig Oren]

Lost the message that was here and there is no Undo in the Edit.
Anyway, the current discussion about nixing annuity for a better "investment" has been discussed on M* board adnauseum for years. But the facts are that there are investors that for them an annuity would be the right financial planning approach and there are those who it wouldn't. Same with buying an LTCI vs. self insuring, etc. So what's new under the sun? Read Larry Swedroe's new book on it.

[RiskAverse]

[rschreit]

[nisiprius]

[bob90245]

[Vig Oren]

More on annuities:

http://www.financial-planning.....01023.html


Annuities Special: The Right Rider

"Boomers want guaranteed lifetime income, but don't want to buy an immediate annuity. Variable annuity issuers think they have a solution."

It also says:

“The Hartford, a leading issuer of GMWBs, says that about 70% of its variable annuity customers elect some sort of guaranteed withdrawal benefit. “

Does Vanguard sell such annuities?

[tc101]

Someone asked in a private message about why I said Hartford lied to me in an earlier post. I'll put my response here so everyone can read it:

It was Hartford, not the local agent. It was the department that transfers annuities. I say they lied because again and again they would say they were going to send the annuity to Vanguard at a certain date, then it would not be sent, then I would call back and they would apologize and say it would be sent at some other future date and the cycle repeated itself. If this only happened one or two times it might be incompetence, but it happened so many times it was obviously a deliberate attempt to delay the transfer. It was your standard "The check is in the mail" routine. When I contacted my state insurance commissioner they did the transfer.

It was an old annuity my father had bought for me in the 60's and it had a very low return, so it was to their advantage to delay transfer as long as possible. It was done in such a way that I am almost certain it was company policy, although I can't prove that.

[Vig Oren]

Rschreit, OT

1)You wrote:

“LOL. One actuary seems like a small data set, maybe an outlier despite good bloodlines”

Question: If you are an actuary, are my son’s designations worth anything, FSA, MAAA, Director, Health & Welfare?

2) Is nisiprius from Cyprius?

[rschreit]

[Vig Oren]

rschreit,

IMO, those actuaries who deal with insurance underwriting, be it life (& annuities), health, property, etc., and even pensions ala Hewitt, know very little about stock market investing. What's your take?

[rschreit]

[nisiprius]

[RiskAverse]

[RiskAverse]

[mephistophles]

I am a licensed insurance and annuity salesman. I am considered, by many in my area, to be an expert in these products as I have about four succesful decades of expereience in these areas.

I conclude that annuities are generally not needed by the investing and insuring public. I never sell annuities where they are not needed. I willingly and happily forego these rich and easy commissions in order to better serve my clientele.

IMHO the endless annuity threads on this forum are largely unnecessary and mostly unproductive. I know that several top Diehards own annuities and that this product was a good choice in their unique situations.

Regards,

ole meph

[Vig Oren]

meph, could it be that the low interest in SPIAs is b/c of the broker's low commissions on it? Also, what about the possibility that Congress will act on exempting tax on SPIAs should boomers agree to annuitize their stocks/bonds nest eggs?

[bob90245]

[Taylor Larimore]

Hi Bob:

[sscritic]

On Sunday, nisiprius wrote:

[nisiprius]

[nisiprius]

[Valuethinker]

[Orion]

I've seen a couple of studies that show increased survivability when annuities are added to a stock/bond mix. However, as far as I know, all of these studies use actual historical data for stock and bond performance, but simply assume that annuities will survive and pay as promised. It seems that adding another portfolio element that is assumed never to disappear could only enhance the predicted survivability. However, my father tells me that during the great depression, he remembers most annuities simply disappearing.

Hopefully someday, someone will a do a "Trinity Study for annuities" that tells you what percentage of your annuity promise can be historically counted on, whether state guarantees mean anything during such major downturns, and how many annuities you need to be diversified.