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i plan on spending down close to 0.. i like the video
Most people already have much of their retirement income in an annuity called social security. Why in the world would you put anything else in one? Insurance companies don’t do it to help you, they do it to help themselves to your money.
bingo … if it was good for us , theyd go broke….what do people think these insurance companies are doing with their money when they buy an annuity ? … any guesses ?…..they invest it
The concept is to create security for those that can’t handle risk. Of course that costs something but it all comes down to each individual and their personal situation.
Sure but an annuity is insurance, no different than multiple other types of insurance we pay for to reduce risk. We can almost always self insure, but that creates a different risk
A couple of points your assumption sounds like somebody’s going to put the whole portfolio in an annuity. No one would do that it would be in Lou of maybe the bond portion for an example anyone who takes more than 10% which is usually the amount they allow would drain their portfolio very quickly, and you’re only talking about one kind of annuity a spia as a financial planner you should be talking about different types that are also out there, fixed indexed annuities, which take the risk out of the market and provide some market upside, also makers which have compound interest over the length of the annuity because when you invest money in the market, and you say we have an average of 8% if you have down years in between that’s going to make the total sum of money at the end a lot different than compounding at for example a 6% rate year in a year out so I don’t think you’re being quite as transparent as you could be
Also, let the audience know that you make a lot more money if they keep that total amount in the plan as opposed to the one time fee, you make for an annuity for (full transparency)
And how much do you rip people off for on your annuity contracts…there’s a fee for that, there’s a fee for that, there’s a fee for that. You obviously sell annuities.
If you wanted to add an income rider to fixed annuity it would be a fee for that, but not for the new annuity itself
Couple things, the biggest issue with the die with zero is how do I maximize the amount I pull from my portfolio, without running out of money while living. The only product that can guarantee that is an annuity. In your final example what happens if that person lives to 95? If you took $1M portfolio in 2000 and pulled 6.85 a year, currently you’d have $40,216. Hopefully you’re about to die. Now did I cherry pick that time frame? Yes, but who said you won’t retire in a similar situation? And your point on the inflation calculation is correct, but just like stocks of you wanna factor inflation you’d start with a lower withdrawal, and with the go-go, slo-go, and no-go. What better way to tackle that then give you extra income in the early years, with an effective after inflation decreasing as you get older, study after study has shown as you get older you spend less in retirement. Also to the liquidity point, that risk is with stocks too, if you’re maximizing a plan to “die with zero” a one time liquidity issue can really hurt that plan and can cause you to run out before death. Also an income annuity has no annual fees vs working with an advisor that charges 1%, now I do know Jazz charges .5% on over $250k. So that 6.85% payout with jazz would actually run out sooner using my 2000 scenario if you factored the fee.
How about a video on Jazz average earnings/client over the last 5 years?
I’ve never been able to find out what their average returns are for managed money.
As a young saver I perceive that my risk capacity on my most basic expenses is low, but many things have more capacity for risk and should allocated elsewhere. Also considering that socal security is a income annuity.
Sounds like a bunch of life insurance salesmen commented on your video 😂
I’m sure as hell not one of them! But the man could better demonstrate his point.
Hi Eric. I’ve watched thru this a couple of times and unfortunately it does not appear to me that you have clearly made your point. The annuity completely removes the excess longevity risk, but does have an inherent inflation risk. Noted. I would conjecture that if you were to take a poll of retirees on whether they lose more sleep with worries about outliving their money vs keeping up with inflation the former would win out. Then to paraphrase something you stated, “maybe you don’t need all that money when you start out at 6.85%…you could put some extra aside and do something else with it…” ie…you could customize your plan! As noted by others, people tend to spend less as they age, so how better to plan reduced income needs over time than to start out with an excessive amount and then have it not keep up with inflation over the years? (doing “something else” with that excess and thereby “customizing” your plan). This is not to mention that market investment is also not immune to inflation and can impose significant sequence of return risk. Hence I am just not understanding how you’ve demonstrated that annuities are a poorer choice for most people who desire to spend down all of their money during their lifetimes?
So the bottom line is if you really don’t want to leave anything behind the annuity will give you more income vs a retirement plan with 90-95% confidence.
Sure no one should buy it because people should leave money behind, but gotta be fair in the math.
Also that 3% commission on the annuity is small faction of what is spent on full service financial advice.
The best advice to deal with long life risk is delaying social security to 70.. which, by the way, is an inflation protected annuity.
Great video! 😎
I really like jazz videos. Thanks, but I don’t understand how someone can worry about dying with money. Living without money is the reason for investment and working so we can live comfortably. I could be wrong I think when we are dead we don’t need money. Just joking I understand that your job is too give someone a plan for what they want.
Excellent analysis, Eric.
And they thought was not a fire fighter in the past. Good video
My mom got suckered into a terrible 2% lifetime annuity 10 years ago with a ten-year maturity date. I’m in the process of moving those funds into a money market account paying 5%. Insurance companies are experts at taking advantage of fearful retirees.