laddered cd's or deferred variable annuity with gurantees

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riskonoff
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Joined: Tue Aug 23, 2011 8:22 am

laddered cd's or deferred variable annuity with gurantees

Post by riskonoff » Tue Dec 06, 2011 5:22 pm

I have a number of friends and family that refuse to have any money in the stock market (ages 40 to 60).

I am not an Annuity guy but would you invest in a Deferred Variable Annuity with gurantees versus the laddered CD's that these people are presently in.

Hence, if you had to choose would you pick laddered CD's or Deferred Variable Annuity with a minimum gurantee.

thanks
Last edited by riskonoff on Tue Dec 06, 2011 10:18 pm, edited 1 time in total.

staustin
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Re: advice

Post by staustin » Tue Dec 06, 2011 6:15 pm

I've a good friend that is a professional money manager. Over dinner a few weeks ago, he make the argument that he's advising a good number of his clients simply to purchase annuities. That, against the current backdrop, could not argue against it given the return. It seems to me that it's a personal choice. That said, insurance companies themselves heavily invest in the market. Thus, if you want true risk free investing, with minimal return/risk, treasuries and laddered cd's are the best alternative. For young folks, this strategy would also equate to a very low expense lifestyle and a strong commitment to saving.

Brody
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Re: advice

Post by Brody » Tue Dec 06, 2011 6:36 pm

You may want to change your subject title so that it isn't so generic.

A deferred annuity with guarantees could possibly make sense, but if it is a variable annuity, the money IS in the market.

Long term, if I had to choose between a variable annuity with guarantees or laddered CD's, I would choose the VA. However, fortunately, I don't have to make that choice. I would choose neither.
I am the poster formerly known as Oneanddone.

dbr
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Re: advice

Post by dbr » Tue Dec 06, 2011 6:45 pm

riskonoff wrote:I have a number of friends and family that refuse to have any money in the stock market (ages 40 to 60).

I am not an Annuity guy but would you invest in a Deferred Annuity with gurantees versus the laddered CD's that these people are presently in.

Hence, if you had to choose would you pick laddered CD's or Deferred Annuity with gurantees.

thanks


Is there a reason the choice is restricted to these two, even granting that stocks are out?

riskonoff
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Joined: Tue Aug 23, 2011 8:22 am

Re: laddered cd's or deferred variable annuity with gurantee

Post by riskonoff » Tue Dec 06, 2011 10:24 pm

i did change the title....

i am naming just these 2 options because the deferred variable annuity is the only way that i can think of that would cause them to dip their toes in the stock market.

I have explained the merits of a 20 to 30% equity allocation but it falls on deaf ears. They all think the stock market will crash at some point......

xerty24
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Re: laddered cd's or deferred variable annuity with gurantee

Post by xerty24 » Tue Dec 06, 2011 10:45 pm

riskonoff wrote:They all think the stock market will crash at some point......

they're right, it will crash many times. The question is whether it's more up than down,and if you have time to wait.
No excuses, no regrets.

john94549
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Re: laddered cd's or deferred variable annuity with gurantee

Post by john94549 » Wed Dec 07, 2011 12:37 am

To the OP, you might explain to your friends that some folks have stocks, bonds, a ladder of CDs and some investment real estate to boot. And intend to purchase a "longevity insurance" SPIA in a few years. I think the word is, . . .

Yes, diversification.

Dandy
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Re: laddered cd's or deferred variable annuity with gurantee

Post by Dandy » Wed Dec 07, 2011 11:42 am

With interest rates so low I would not jump into annuities with a substantial portion of the nest egg unless expenses are driving them beyond what they consider a "safe" withdrawal. If there was a way to make the planned annuity purchase over several years that might be better if you are locked into a current rate. When/if interest rates rise bond funds and stock funds will take at least a short term hit. Having some assets that won't take that hit will be a comfort.

BruDude
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Location: Las Vegas

Re: laddered cd's or deferred variable annuity with gurantee

Post by BruDude » Wed Dec 07, 2011 12:31 pm

Why not a deferred fixed annuity with an income guarantee instead of a VA? Removes the market risk and does not charge M&E fees or fund fees. The guaranteed income is usually higher too.

Brody
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Re: laddered cd's or deferred variable annuity with gurantee

Post by Brody » Wed Dec 07, 2011 2:02 pm

riskonoff wrote:I have a number of friends and family that refuse to have any money in the stock market (ages 40 to 60).

I am not an Annuity guy but would you invest in a Deferred Variable Annuity with gurantees versus the laddered CD's that these people are presently in.

Hence, if you had to choose would you pick laddered CD's or Deferred Variable Annuity with a minimum gurantee.

thanks


I think that it is a mistake to try to change them. In my experience, savers do really well long term. In my experience, investors do really well long term. In my experience investors who become savers and/or savers who try to become investors get slaughtered. This is because a saver who becomes an investor does so after the market goes up and buys high. An investor who becomes a saver does so after the market goes down.

As long as someone is putting a decent amount of money away and is staying away from debt, they should do fine.
I am the poster formerly known as Oneanddone.

dbr
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Re: laddered cd's or deferred variable annuity with gurantee

Post by dbr » Wed Dec 07, 2011 3:27 pm

Brody wrote:
I think that it is a mistake to try to change them. In my experience, savers do really well long term. In my experience, investors do really well long term. In my experience investors who become savers and/or savers who try to become investors get slaughtered. This is because a saver who becomes an investor does so after the market goes up and buys high. An investor who becomes a saver does so after the market goes down.

As long as someone is putting a decent amount of money away and is staying away from debt, they should do fine.


The above might be some pretty good wisdom. I decided I couldn't answer the question because I wouldn't be able to figure out well enough what the risk and the return on a specific deferred variable annuity might be to make an informed decision. That might suggest the annuity is out. I notice no one has volunteered to examine any VA in particular and provide an answer to the question.

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