North American Annuity

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NMTINX
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North American Annuity

Post by NMTINX »

Dear all,

I am new to this forum and financial planning. I just hire my financial advisor, and he tries to sell me North American Annuity because he said annuity will guarantee no loss but moderate gain throughout long period of time. I wonder is anyone heard about North American Annuity from Sammons financial company? Are they reliable? Is it worth to invest annuity?

Thanks!
Hebell
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Re: North American Annuity

Post by Hebell »

Their comdex score is 89. They are an A+ rated company. They have been around since the 1920s.

North American and Midland are both part of the Sammons financial group. I just bought a MYGA from midland, and will be buying one from North American next. I wait and buy them in $100,000 chunks, so as to get a better rate. I am not willing to go with an a a- or investment grade company. Not with all that's going on right now.

I cannot tell you what the terms of your annuity are any good, but I can certainly tell you that the company is very very respectable. Just one notch down from New York Life.

P.S. My MYGA is a deferred income three year annuity. I assume you are looking at a SPIA.
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Nate79
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Re: North American Annuity

Post by Nate79 »

NMTINX wrote: Sat Jan 09, 2021 12:10 pm Dear all,

I am new to this forum and financial planning. I just hire my financial advisor, and he tries to sell me North American Annuity because he said annuity will guarantee no loss but moderate gain throughout long period of time. I wonder is anyone heard about North American Annuity from Sammons financial company? Are they reliable? Is it worth to invest annuity?

Thanks!
Is your financial advisor preparing you an investment plan that involves an appropriate asset allocation utilizing low cost index funds? Or are they an insurance salesman?
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arcticpineapplecorp.
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Re: North American Annuity

Post by arcticpineapplecorp. »

NMTINX wrote: Sat Jan 09, 2021 12:10 pm Dear all,

I am new to this forum and financial planning. I just hire my financial advisor, and he tries to sell me North American Annuity because he said annuity will guarantee no loss but moderate gain throughout long period of time. I wonder is anyone heard about North American Annuity from Sammons financial company? Are they reliable? Is it worth to invest annuity?

Thanks!
that sounds like a pitch for an indexed annuity to me (the kind that make the salesmen the most money!) not a SPIA.

run run run.

the fact he's tryng to sell you insurance is the first red flag. I'm sure there are others.

how did you find this advisor and what does he charge and is he a fiduciary (probably not) are the other things to know.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
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Stinky
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Re: North American Annuity

Post by Stinky »

NMTINX wrote: Sat Jan 09, 2021 12:10 pm Dear all,

I am new to this forum and financial planning. I just hire my financial advisor, and he tries to sell me North American Annuity because he said annuity will guarantee no loss but moderate gain throughout long period of time. I wonder is anyone heard about North American Annuity from Sammons financial company? Are they reliable? Is it worth to invest annuity?

Thanks!
Welcome to the Forum! Glad that you posted your question.

“North American” - good company. I actually have a policy with them, but not the kind you’re probably describing.

“Annuity will guarantee no loss but moderate gain throughout long period of time” - probably a BAD product. Probably an “indexed annuity”, which will come with high surrender charges and large, undisclosed fees that are built into the product. I would not recommend an indexed annuity.

Please post back if you can provide more information on the product you’re being pitched.
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Hebell
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Re: North American Annuity

Post by Hebell »

In my first reply to you, I missed the sentence on moderate gain. Yes I would avoid any indexed annuity. MYGAs SPIAs or deferred income annuities would be fine.
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NMTINX
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Re: North American Annuity

Post by NMTINX »

Thank you for all your reply. My financial advisor is not trying to sell me an insurance policy but an investment plan involves asset allocation. I believe he is trying to sell me indexed annuity, and he is not fiduciary so I believe he will get commission from North American. I found my advisor through my company I work for and I only paid fixed amount (less than a thousand) to set up a financial plan how to allocate my funds for retirement. I will ask my advisor for more detailed information regarding the annuity next week. However, may I know why Indexed annuity is not a good product but MYGAs SPIAs or deferred income annuities would be fine?

Thanks again.
formerlybroke
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Re: North American Annuity

Post by formerlybroke »

In 2021 the notion that ALL index annuities are bad is both dated and ill informed. As with any product there are providers that deliver well constructed contracts, at appropriate fee levels, to support index related returns.

That said, index annuities are far more complex and require you to do additional due diligence versus buying a simple MYGA annuity.
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Re: North American Annuity

Post by Stinky »

NMTINX wrote: Sat Jan 09, 2021 4:38 pm Thank you for all your reply. My financial advisor is not trying to sell me an insurance policy but an investment plan involves asset allocation. I believe he is trying to sell me indexed annuity, and he is not fiduciary so I believe he will get commission from North American. I found my advisor through my company I work for and I only paid fixed amount (less than a thousand) to set up a financial plan how to allocate my funds for retirement. I will ask my advisor for more detailed information regarding the annuity next week. However, may I know why Indexed annuity is not a good product but MYGAs SPIAs or deferred income annuities would be fine?

Thanks again.
First, know that your financial advisor is a salesman. He may have provided you with a financial plan, but he is trying to push a product that will earn him a nice commission, maybe 5-8% of what you invest.

There’s a nice article in the wiki about indexed annuities:

https://www.bogleheads.org/wiki/Equity-indexed_annuity

By contrast, a MYGA is a straightforward contract. You make a premium payment - you get a known, guaranteed interest rate for a specified period of time - you get your money back. And a SPIA is also straightforward. Commissions on both of these products are less than on indexed annuities, so the salesman doesn’t have as much motivation to sell them to you.
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Stinky
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Re: North American Annuity

Post by Stinky »

formerlybroke wrote: Sat Jan 09, 2021 5:49 pm In 2021 the notion that ALL index annuities are bad is both dated and ill informed. As with any product there are providers that deliver well constructed contracts, at appropriate fee levels, to support index related returns.
Do you have any particular indexed annuities in mind?
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Lastrun
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Re: North American Annuity

Post by Lastrun »

OP, below are the FINRA and SEC investor alerts on indexed annuities. FYI, the SEC alert was updated last July.

https://www.sec.gov/oiea/investor-alert ... dannuities

https://www.finra.org/investors/alerts/ ... lex-choice
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Re: North American Annuity

Post by formerlybroke »

Stinky wrote: Sat Jan 09, 2021 6:02 pm
formerlybroke wrote: Sat Jan 09, 2021 5:49 pm In 2021 the notion that ALL index annuities are bad is both dated and ill informed. As with any product there are providers that deliver well constructed contracts, at appropriate fee levels, to support index related returns.
Do you have any particular indexed annuities in mind?
Plenty to explore here https://www.barrons.com/articles/the-be ... 1595028594

And the article does offer:

“Indeed, annuities have long had a suspect reputation. They are complicated at a glance, and even more complicated when you look under the hood at the hundreds of iterations on the basic fixed and variable annuity structures. Fees can be high and either layered or hidden. And they have a reputation of being oversold by commission-motivated insurance agents.”

But read on for the fuller picture.

You should be able to close the subscription pop up to read article (I did).
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Nate79
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Re: North American Annuity

Post by Nate79 »

So they were an Insurance salesman. Nailed it!
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Re: North American Annuity

Post by EngineerGuy »

formerlybroke wrote: Sat Jan 09, 2021 5:49 pm In 2021 the notion that ALL index annuities are bad is both dated and ill informed. As with any product there are providers that deliver well constructed contracts, at appropriate fee levels, to support index related returns.

That said, index annuities are far more complex and require you to do additional due diligence versus buying a simple MYGA annuity.
Can you provide an example of a good index annuity? Supposedly these products are so bad that the industry changed the name to shake off some of the stigma.
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Re: North American Annuity

Post by David Jay »

formerlybroke wrote: Sat Jan 09, 2021 6:20 pm
Stinky wrote: Sat Jan 09, 2021 6:02 pm
formerlybroke wrote: Sat Jan 09, 2021 5:49 pm In 2021 the notion that ALL index annuities are bad is both dated and ill informed. As with any product there are providers that deliver well constructed contracts, at appropriate fee levels, to support index related returns.
Do you have any particular indexed annuities in mind?
Plenty to explore here https://www.barrons.com/articles/the-be ... 1595028594

And the article does offer:

“Indeed, annuities have long had a suspect reputation. They are complicated at a glance, and even more complicated when you look under the hood at the hundreds of iterations on the basic fixed and variable annuity structures. Fees can be high and either layered or hidden. And they have a reputation of being oversold by commission-motivated insurance agents.”

But read on for the fuller picture.

You should be able to close the subscription pop up to read article (I did).
Please select any index annuity off of the Barrons list and explain to us how it works, the crediting formulas, the costs, and why it is a better product than the alternative options available to the individual investor.

Note: Not the Single Payment Immediate Annuities and Single Payment Deferred Annuities (the first two lists in the article), many here agree that they can be a useful component of a retirement strategy.
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Kitty Telltales
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Re: North American Annuity

Post by Kitty Telltales »

There is no advantage of buying an annuity within a non-taxable retirement account. Or are you looking for a SPIA to fund your retirement?

What do you mean by an index annuity? Is this a variable annuity in which you will invest in index funds? If so, ask the salesperson if you will receive the dividends and capital gains annually as you would if you invested directly in an index mutual fund.

I’m suspicious because I fell for this “lower your risk” line in 2003.

Keep searching former threads and the WiKi articles on this topic a much has been discussed on annuities.
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Re: North American Annuity

Post by Mel Lindauer »

Here's a Forbes column I did some years ago, warning investors to stay away from those horrible index annuities. It's as true now as it was back then, so run, don't walk.

https://www.forbes.com/2010/08/10/truth ... 4cfb861257
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Re: North American Annuity

Post by NMTINX »

Thank you for all your replies last week. I talked to my advisor again, and he is trying to sell me a fixed indexed annuity (tax deferred). The annuity is tied the performance of S&P MARC 5% ER index. If the index has loss for the year, the annuity will have 0% return. If the index has gain for the year, my annuity will have 80% of the gain. For example, if the MARC index has -10% return for the year, the annuity has no loss. if the MARC index has +10% return, the annuity will have 8% return. Based on the last 10-year performance, the annuity has average return around 4% annually. If I don't withdraw in 10 years, I don't need to pay any fees. There is no charges when I start to withdraw money. The annuity return will be a few % higher than keeping money in CD or bonds. Based on asset allocation, my advisor recommends to put a portion of funds in different stock mutual funds but I hesitate to move all my bond or money market funds into one annuity since I can't move my money out of annuity without cost if I find something wrong with it. I wonder is anyone know where is the best resource to search for annuity options? They guarantee no loss and no fees, and it seems too good to be true. I would like to check out other annuities before I commit.

Thanks again.
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Re: North American Annuity

Post by Nate79 »

NMTINX wrote: Sat Jan 16, 2021 4:51 pm Thank you for all your replies last week. I talked to my advisor again, and he is trying to sell me a fixed indexed annuity (tax deferred). The annuity is tied the performance of S&P MARC 5% ER index. If the index has loss for the year, the annuity will have 0% return. If the index has gain for the year, my annuity will have 80% of the gain. For example, if the MARC index has -10% return for the year, the annuity has no loss. if the MARC index has +10% return, the annuity will have 8% return. Based on the last 10-year performance, the annuity has average return around 4% annually. If I don't withdraw in 10 years, I don't need to pay any fees. There is no charges when I start to withdraw money. The annuity return will be a few % higher than keeping money in CD or bonds. Based on asset allocation, my advisor recommends to put a portion of funds in different stock mutual funds but I hesitate to move all my bond or money market funds into one annuity since I can't move my money out of annuity without cost if I find something wrong with it. I wonder is anyone know where is the best resource to search for annuity options? They guarantee no loss and no fees, and it seems too good to be true. I would like to check out other annuities before I commit.

Thanks again.
Of course your insurance salesman is trying to sell you this toxic product. They probably have a boat payment coming up soon. Did you even read the link provided by Mel above your post?

And why are you looking at annuities?
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Stinky
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Re: North American Annuity

Post by Stinky »

NMTINX wrote: Sat Jan 16, 2021 4:51 pm Thank you for all your replies last week. I talked to my advisor again, and he is trying to sell me a fixed indexed annuity (tax deferred). The annuity is tied the performance of S&P MARC 5% ER index. If the index has loss for the year, the annuity will have 0% return. If the index has gain for the year, my annuity will have 80% of the gain. For example, if the MARC index has -10% return for the year, the annuity has no loss. if the MARC index has +10% return, the annuity will have 8% return. Based on the last 10-year performance, the annuity has average return around 4% annually. If I don't withdraw in 10 years, I don't need to pay any fees. There is no charges when I start to withdraw money. The annuity return will be a few % higher than keeping money in CD or bonds. Based on asset allocation, my advisor recommends to put a portion of funds in different stock mutual funds but I hesitate to move all my bond or money market funds into one annuity since I can't move my money out of annuity without cost if I find something wrong with it. I wonder is anyone know where is the best resource to search for annuity options?

They guarantee no loss and no fees, and it seems too good to be true.

I would like to check out other annuities before I commit.

Thanks again.
Thank you for clarifying that your advisor is trying to sell you a fixed indexed annuity.

You say above "it seems too good to be true". Your sense is correct - it is too good to be true.

Please read the links posted upthread that will lead you to the FINRA and SEC warnings, and Mel Lindauer's article. Those links are all important to help you understand the annuity that is being pitched to you.

Your advisor is lying when he says there are no fees. There are internal fees of roughly 2% embedded in the product design.

Your advisor wants you to buy an annuity that credits 80% of a stock index, floored at zero. But he's touting it to you based upon "making a few % higher than keeping money in CD". This is confusing as all get out.

If you want to buy an annuity, buy a multi-year guaranteed annuity (MYGA). Your agent will make a lot less commission, so he won't be happy, but you'll get a better product.
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NMTINX
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Re: North American Annuity

Post by NMTINX »

The reason I start to check out annuity that is because of my financial advisor. My advisor claims the indexed annuity will provide principal protection and have better return than CD and bonds. Especially the interest rate is at the historical low and probably it will go back up gradually in the next few years and it means bond price will go down and return of bond mutual fund will be negative. To protect my principal, I wonder I am better off keeping my funds in money market fund instead of buying annuity. Even the return may be less, mutual funds are more flexible to be reallocated based on the stock market. I still have at least 10 years away from retirement, and I wonder I should start to check out annuity when I am getting closer to my retirement but not now.
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Re: North American Annuity

Post by Stinky »

NMTINX wrote: Sat Jan 16, 2021 9:55 pm The reason I start to check out annuity that is because of my financial advisor. My advisor claims the indexed annuity will provide principal protection and have better return than CD and bonds. Especially the interest rate is at the historical low and probably it will go back up gradually in the next few years and it means bond price will go down and return of bond mutual fund will be negative. To protect my principal, I wonder I am better off keeping my funds in money market fund instead of buying annuity. Even the return may be less, mutual funds are more flexible to be reallocated based on the stock market. I still have at least 10 years away from retirement, and I wonder I should start to check out annuity when I am getting closer to my retirement but not now.
If you truly want to buy an annuity that will give you returns that beat money markets and be competitive with bonds, consider a MYGA. Presuming that you keep it until maturity, you will get back principal plus interest, with no market value loss if interest rates go up.

You should look at Canvas Annuity and Gainbridge. Canvas is offering up to 3.50% for a seven year MYGA, with surrender charges comparable to an indexed annuity. Gainbridge is offering 3% and higher for MYGAs of 8-10 years, with lower surrender charges than an indexed annuity. Www.Gainbridge.life or www.canvasannuity.com.

Your financial advisor is looking to score a big fat commission if he can sell you an indexed annuity. That’s his motivation.
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Nate79
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Re: North American Annuity

Post by Nate79 »

Look up the word fiduciary. Ask your advisor if they are one. They will either hem and haw, maybe will lie, or will say no. A fiduciary would not sell you such garbage.
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Re: North American Annuity

Post by David Jay »

To be very clear and very plain: Your "advisor" wants to sell you a fixed index annuity because he will make a 6% to 8% commission on the entire amount of money you put into that product. That is his sole object, he is taking advantage of his relationship to you, he is not operating in your best interest.

We have no financial stake in your investments, we cannot gain anything from this conversation. Please read the links above.
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Nate79
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Re: North American Annuity

Post by Nate79 »

Stinky wrote: Sat Jan 16, 2021 10:10 pm
NMTINX wrote: Sat Jan 16, 2021 9:55 pm The reason I start to check out annuity that is because of my financial advisor. My advisor claims the indexed annuity will provide principal protection and have better return than CD and bonds. Especially the interest rate is at the historical low and probably it will go back up gradually in the next few years and it means bond price will go down and return of bond mutual fund will be negative. To protect my principal, I wonder I am better off keeping my funds in money market fund instead of buying annuity. Even the return may be less, mutual funds are more flexible to be reallocated based on the stock market. I still have at least 10 years away from retirement, and I wonder I should start to check out annuity when I am getting closer to my retirement but not now.
If you truly want to buy an annuity that will give you returns that beat money markets and be competitive with bonds, consider a MYGA. Presuming that you keep it until maturity, you will get back principal plus interest, with no market value loss if interest rates go up.

You should look at Canvas Annuity and Gainbridge. Canvas is offering up to 3.50% for a seven year MYGA, with surrender charges comparable to an indexed annuity. Gainbridge is offering 3% and higher for MYGAs of 8-10 years, with lower surrender charges than an indexed annuity. Www.Gainbridge.life or www.canvasannuity.com.

Your financial advisor is looking to score a big fat commission if he can sell you an indexed annuity. That’s his motivation.
This is good advice. If you want safety of funds that beat MM or CD rates MYGA is a good option. This is one of two types of good annuities. SPIA is the other.

You should stop talking to your insurance salesman. They don't have your interest in mind, only their bottom line.
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Re: North American Annuity

Post by David Jay »

Stinky:

Have you seen this before? The SP500 MARC 5% Index is an index that includes commodities and Treasuries, sort of a "balanced" index. I guess participation rates were getting so low as to be embarrassing. So they created a lower-performance index and kept the name "SP500" specifically to confuse prospects that this was the SP500 stock index.

Link to index description here (including PDF factsheet and methodology): https://www.spglobal.com/spdji/en/indic ... /#overview

This is just evil. I went back in and looked at brochure (under "additional information), there is dynamic adjustment but if you look at the graph it appears to be about 20% SP500 (less dividends, of course), 20% gold and 60% treasuries. So they use the name SP500 but the index provides a nominal 20% exposure to the SP500 price index, then the annuity provides 80% of the 20%, so you are looking at about a 16% exposure to the price index. Which is something south of 14% of SP500 total return.
Last edited by David Jay on Sat Jan 16, 2021 10:44 pm, edited 4 times in total.
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Re: North American Annuity

Post by David Jay »

NMTINX wrote: Sat Jan 16, 2021 4:51 pmIf I don't withdraw in 10 years, I don't need to pay any fees. There is no charges when I start to withdraw money.
You will need to pay taxes on all of the gains from this policy when you take the money out.

How old are you? If you are less than 59.5 when you withdraw you will be subject to a 10% penalty in addition to the taxes above.
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Re: North American Annuity

Post by David Jay »

MNTINX:

The annuity salesman is telling you there is no risk. Please ask the annuity salesman for the minimum guaranteed return after 10 years. This is the amount of your investment that they guarantee that you will receive back after 10 years.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
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Re: North American Annuity

Post by Hebell »

David Jay wrote: Sat Jan 16, 2021 10:30 pm Stinky:

Have you seen this before? The SP500 MARC 5% Index is an index that includes commodities and Treasuries, sort of a "balanced" index. I guess participation rates were getting so low as to be embarrassing. So they created a lower-performance index and kept the name "SP500" specifically to confuse prospects that this was the SP500 stock index.

This is just evil. I went back in and looked at brochure (under "additional information), there is dynamic adjustment but if you look at the graph it appears to be about 20% SP500 (less dividends, of course), 20% gold and 60% treasuries. So they use the name SP500 but the index provides a nominal 20% exposure to the SP500 price index, then the annuity provides 80% of the 20%, so you are looking at about a 16% exposure to the price index. Which is something south of 14% of SP500 total return.
David Jay nailed it. You should run, not walk, away from this annuity. You do not want a product that has such deception. I was surprised it was coming from North American which is a good company. Their MYGAs are fine.
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Re: North American Annuity

Post by Stinky »

David Jay wrote: Sat Jan 16, 2021 10:30 pm Stinky:

Have you seen this before? The SP500 MARC 5% Index is an index that includes commodities and Treasuries, sort of a "balanced" index. I guess participation rates were getting so low as to be embarrassing. So they created a lower-performance index and kept the name "SP500" specifically to confuse prospects that this was the SP500 stock index.

Link to index description here (including PDF factsheet and methodology): https://www.spglobal.com/spdji/en/indic ... /#overview

This is just evil. I went back in and looked at brochure (under "additional information), there is dynamic adjustment but if you look at the graph it appears to be about 20% SP500 (less dividends, of course), 20% gold and 60% treasuries. So they use the name SP500 but the index provides a nominal 20% exposure to the SP500 price index, then the annuity provides 80% of the 20%, so you are looking at about a 16% exposure to the price index. Which is something south of 14% of SP500 total return.
David,

Thanks for bringing this to my attention. If possible, I believe that this "index" is even worse than you think.

Clicking through on the link that you provided, I note that the "Index Launch Date" is March 27, 2017, and that all performance information shown prior to that date is "back-tested" - that is, garbage. Here's the full disclosure from the S&P Global site:

The index Launch Date is Mar 27, 2017. All information for an index prior to its Launch Date is back-tested, based on the methodology that was in effect on the Launch Date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back-tested returns.

I can make a guess as to what is happening here. Late in my time working in the insurance industry, some companies that were selling indexed universal life starting coming up with "contrived" indexes like this, that appeared to be tailored to make the past "back-tested" performance to be as strong as possible. They could then make these indices available within their indexed universal life products, and sales illustrations using these contrived indices (and their past performance) would look better than sales illustrations for other indexed UL products or whole life, which use more traditional measures to prepare sales illustrations. This use of contrived indices led to a massive industry battle over how to properly illustrate indexed universal life, which led to a lot of regulatory scrutiny - not a pretty picture.

I hadn't been aware that these contrived indices had made their way over to indexed annuities, but it looks like they have. What the salesman is selling is a product using an index that is less than 4 years old - an index that was artificially contrived to show "great" results for the years immediately before it was started. I have no confidence in what this index will do going forward.

NMTINX- David Jay referred to this product and the index it is using as "evil". I firmly agree with that. You advisor is trying to sell you a horrible product, that will make him a ton of money and almost certainly will not perform as are being sold a bill of goods.

I would not buy this product. I would not talk to this financial advisor ever again. He is giving you horribly bad, self-serving advice on this product, and if he's giving bad advice here, he's likely giving it on other things that he's pitching to you.

Please walk away from this salesman.
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Re: North American Annuity

Post by Stinky »

Just to be clear - in my previous post I said that North American probably contrived this "SP500 MARC 5% Index" in order to make its indexed universal life illustrations look more attractive.

That's the sole reason for this index. I don't think that North American believes it will perform particularly well in the future. I don't believe that North American believes that it will give its policyholders superior returns. I believe that North American contrived this index solely to make their sales illustrations look better so that they could sell more business.

The life insurance sells some honorable products. The term life insurance product is a wonderful, inexpensive way to provide for a young family after the untimely death of a breadwinner, and no other product can duplicate its benefits. A single premium immediate annuity guarantees a lifetime income that cannot be outlived.

But tricks, tom foolery, and deception like this "Index" have all too often been part of the sales process of the life insurance industry. I'm embarrassed that something like this "Index" has been pitched to the public.
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Re: North American Annuity

Post by bsteiner »

Is he an advisor or an insurance agent?
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Re: North American Annuity

Post by NMTINX »

Thanks for all your replies again. The recommendation came from a financial advisor not from an insurance agent. I will stay away from indexed annuity, and I will spend more time on researching asset allocation as well as financial planning. Thanks!
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Re: North American Annuity

Post by Stinky »

NMTINX wrote: Sun Jan 17, 2021 11:25 am Thanks for all your replies again. The recommendation came from a financial advisor not from an insurance agent. I will stay away from indexed annuity, and I will spend more time on researching asset allocation as well as financial planning. Thanks!
Glad that you're staying away from indexed annuities. That's a good decision.

Just one nit - the person you're dealing with may call himself a "financial advisor". But, if he's selling annuities, he is an "insurance agent". By definition.
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Re: North American Annuity

Post by Actin »

You should assume that every annuity product is a scam until proven otherwise
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Re: North American Annuity

Post by Wiggums »

Stinky wrote: Sat Jan 16, 2021 6:53 pm
NMTINX wrote: Sat Jan 16, 2021 4:51 pm Thank you for all your replies last week. I talked to my advisor again, and he is trying to sell me a fixed indexed annuity (tax deferred). The annuity is tied the performance of S&P MARC 5% ER index. If the index has loss for the year, the annuity will have 0% return. If the index has gain for the year, my annuity will have 80% of the gain. For example, if the MARC index has -10% return for the year, the annuity has no loss. if the MARC index has +10% return, the annuity will have 8% return. Based on the last 10-year performance, the annuity has average return around 4% annually. If I don't withdraw in 10 years, I don't need to pay any fees. There is no charges when I start to withdraw money. The annuity return will be a few % higher than keeping money in CD or bonds. Based on asset allocation, my advisor recommends to put a portion of funds in different stock mutual funds but I hesitate to move all my bond or money market funds into one annuity since I can't move my money out of annuity without cost if I find something wrong with it. I wonder is anyone know where is the best resource to search for annuity options?

They guarantee no loss and no fees, and it seems too good to be true.

I would like to check out other annuities before I commit.

Thanks again.
Thank you for clarifying that your advisor is trying to sell you a fixed indexed annuity.

You say above "it seems too good to be true". Your sense is correct - it is too good to be true.

Please read the links posted upthread that will lead you to the FINRA and SEC warnings, and Mel Lindauer's article. Those links are all important to help you understand the annuity that is being pitched to you.

Your advisor is lying when he says there are no fees. There are internal fees of roughly 2% embedded in the product design.

Your advisor wants you to buy an annuity that credits 80% of a stock index, floored at zero. But he's touting it to you based upon "making a few % higher than keeping money in CD". This is confusing as all get out.

If you want to buy an annuity, buy a multi-year guaranteed annuity (MYGA). Your agent will make a lot less commission, so he won't be happy, but you'll get a better product.
MYGA is a better product. Stinky makes a good point about the internal fees that have not been disclosed. Has the salesman reviewed the termination fees to get out of the annuity once You recognize how high the fees are?
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Re: North American Annuity

Post by grabiner »

Stinky wrote: Sun Jan 17, 2021 10:06 am Clicking through on the link that you provided, I note that the "Index Launch Date" is March 27, 2017, and that all performance information shown prior to that date is "back-tested" - that is, garbage. Here's the full disclosure from the S&P Global site:

The index Launch Date is Mar 27, 2017. All information for an index prior to its Launch Date is back-tested, based on the methodology that was in effect on the Launch Date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back-tested returns.

I can make a guess as to what is happening here. Late in my time working in the insurance industry, some companies that were selling indexed universal life starting coming up with "contrived" indexes like this, that appeared to be tailored to make the past "back-tested" performance to be as strong as possible. They could then make these indices available within their indexed universal life products, and sales illustrations using these contrived indices (and their past performance) would look better than sales illustrations for other indexed UL products or whole life, which use more traditional measures to prepare sales illustrations. This use of contrived indices led to a massive industry battle over how to properly illustrate indexed universal life, which led to a lot of regulatory scrutiny - not a pretty picture.

I hadn't been aware that these contrived indices had made their way over to indexed annuities, but it looks like they have. What the salesman is selling is a product using an index that is less than 4 years old - an index that was artificially contrived to show "great" results for the years immediately before it was started. I have no confidence in what this index will do going forward.
One example: if the largest index decline in the last ten years was 19%, you could design a product with protection against index declines of up to 20%. Back-testing would show that the floor had never been hit, but would show nothing about the risk of hitting it in future years.
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Re: North American Annuity

Post by Northern Flicker »

NMTINX wrote: Sat Jan 09, 2021 12:10 pm Dear all,

I am new to this forum and financial planning. I just hire my financial advisor, and he tries to sell me North American Annuity because he said annuity will guarantee no loss but moderate gain throughout long period of time. I wonder is anyone heard about North American Annuity from Sammons financial company? Are they reliable? Is it worth to invest annuity?

Thanks!
Ask the advisor what his or her commission is for selling the annuity. It likely is hidden inside the rate (ie North American is offering a slightly better crediting rate than what you are being offered).
Risk is not a guarantor of return.
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Re: North American Annuity

Post by Mel Lindauer »

Stinky wrote: Sun Jan 17, 2021 11:37 am
NMTINX wrote: Sun Jan 17, 2021 11:25 am Thanks for all your replies again. The recommendation came from a financial advisor not from an insurance agent. I will stay away from indexed annuity, and I will spend more time on researching asset allocation as well as financial planning. Thanks!
Glad that you're staying away from indexed annuities. That's a good decision.

Just one nit - the person you're dealing with may call himself a "financial advisor". But, if he's selling annuities, he is an "insurance agent". By definition.
True that in order to sell insurance products, by law, he must be a licensed insurance salesperson. He might call himself a "financial advisor" in order to distract suckers from realizing that he's actually just an insurance SALESMAN.
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Re: North American Annuity

Post by capjak »

Fixed Index Annuity is a complex product designed to compete with CDs nothing else, (unless an income rider is added/included to provide future income than they are competing with deferred SPIAs).

Expectation is that they will perform similar maybe better/maybe worse than CDs or MYGAs.

North American is a highly rated (A+ AMBEST rated). I have a 7-year MYGA from Midland at 3.5% fixed interest, which is owned by the same parent company.
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Re: North American Annuity

Post by Rex66 »

These poor performing products are going to perform even worse in the future.

The company invests 98% in bonds and treasuries and 2% in options.

Well the low interest environment kills the first part and options have gotten more expensive to boot.

Expect to do either slightly better or worse than a standard fixed annuity.
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Re: North American Annuity

Post by Stinky »

Rex66 wrote: Mon Jan 18, 2021 1:02 pm These poor performing products are going to perform even worse in the future.

The company invests 98% in bonds and treasuries and 2% in options.

Well the low interest environment kills the first part and options have gotten more expensive to boot.

Expect to do either slightly better or worse than a standard fixed annuity.
Fixed indexed annuities usually allow the insurance company to “reset” the participation rates every year. So it’s definitely possible that an attractive-looking participation rate will become less attractive as time goes on. If the policyholder becomes dissatisfied with the fixed indexed annuity while there is still a surrender charge, he’s pretty well stuck.

By contrast , MYGAs have an interest rate that is guaranteed not to change for the states period. At the end of that period, the customer is able to either roll his money into a new annuity or take his entire principal and interest without surrender charge penalty.
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Re: North American Annuity

Post by Rex66 »

They always allow changes in the participation and or caps

Frankly these products are deceptive bc they give the illusion of stock market like returns
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Annuity in IRA vs bond funds in 401K

Post by NMTINX »

[Thread merged into here, see below. --admin LadyGeek]

Dear all,

I have serval 401K accounts. I am thinking to use the fund from one of my 401K accounts to buy an annuity. The annuity will represent 20% of my portfolio in conservative funds. Another 80% of my portfolio will be in my 401K stock funds so I can maintain my 80/20 AA. I wonder what is pros and cons to keep 20% of my funds in annuity (IRA) instead of bond funds in 401K? I am in my late 40, and I am planning to buy a 10-year fixed indexed annuity.

The indexed annuity ties to S&P MARC 5% index. If the index has negative return for the year, annuity will have 0% return. If the index has positive return for the year, annuity will get 80% of the gain for the return. There is no surrender charges if I don’t withdraw in 10 years, and there is no charges or any fees to withdraw after 10 years. Based on the last 10-year historical return from S&P 500, GSCI Gold and 10-year US Treasury Note Future Excess Return index, the annualized returns of MARC 5% has about 5% return. For the worst case, I will get at least 100% principal back when the annuity matures. It seems the return will be higher than the return from bond funds since the interest rate is at the historical low level at this moment.

I heard about the bad reputation about indexed fund but I examine the contract of the annuity and it seems it guarantees I will get at least my principal back unless the stock market will have negative return 10 years in a row. It seems indexed annuity is another option to keep your money safe and have little bit higher return than CD. However, why most people don’t look at annuity as an option when they maintain 80/20 AA in their portfolios? What is pros and cons to keep 20% of my funds in annuity (IRA) instead of bond funds in 401K?

Thanks.
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Re: Annuity in IRA vs bond funds in 401K

Post by Silk McCue »

In your original post recently you were provided strong negative feedback regarding considering an indexed annuity.

viewtopic.php?f=1&t=335793&p=5723268#p5723268

I would encourage you to heed that advice. You are being sold a very misleading and difficult to understand product. It sounds great in a color brochure proffered by someone pretending to have your best interests at heart when they don’t or they are actually too uninformed themselves to know the difference.

I suggest you take advantage of the free resources of this site as I and many others have over the years to get an education in sane and sensible investing.

Wishing you all success in your journey.

Cheers
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Re: Annuity in IRA vs bond funds in 401K

Post by Stinky »

Didn’t you just post about this particular annuity a few weeks ago?

See the link below, which discussed this particular annuity.
viewtopic.php?p=5741589#p5741589

This annuity hasn’t gotten any better in the time since you last asked about it.

The consensus on the Forum the last time was that you shouldn’t buy it. That consensus hasn’t changed.
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Re: North American Annuity

Post by LadyGeek »

NMTINX - In order to give appropriate advice, it's best to keep all the information in one spot. I merged your update back into the original thread.

(Thanks to the member who reported the post. One of the reasons is "Duplicate thread". Providing a link to the original helps - thanks.)
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Re: North American Annuity

Post by NMTINX »

I am sorry if it is a duplicate post. I repost my question because I just want to provide more information and specific. Besides, I am curious why most people doesn't have annuity in their portfolio for AA. Will MYGA or SPIA be also a good option to replace bond funds in my 401 or IRA account? Based on what I read, it seems fixed income annuity can provide better principal protection than bond funds if I am retired or a few years away from retirement. If I still have 10 years away from retirement, bond funds in 401K seem more flexible or may have better return if I rebalance periodically based on my AA.
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Re: Annuity in IRA vs bond funds in 401K

Post by David Jay »

NMTINX wrote: Fri Jan 29, 2021 9:31 pmFor the worst case, I will get at least 100% principal back when the annuity matures.
This is simply not true.

You are listening to the insurance salesman (who calls themself a “financial advisor”) instead of reading the prospectus. If you read the prospectus, you will find that the guaranteed return of capital is less than 100% - most of the index annuity policies I have seen have a guaranteed return between 85% and 90%. The reason is because the annuity has yearly fees. When the crediting formula is zero for a given year, the fees are still due and the annuity loses value that year.
Last edited by David Jay on Sat Jan 30, 2021 8:14 pm, edited 1 time in total.
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Re: North American Annuity

Post by Nate79 »

This is sad really. You didn't listen the first time.
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