Index Annuities - The Income Rider Problem

Index Annuities - The Income Rider Problem

Let's say an agent tells you he can guarantee you 7% per year for the rest of your life guaranteed. This is a BIG lie.

Income riders are based on an age range, not an absolute fixed yield for everyone. Take for example the following age ranges: Age 55 through 59 the payout is 4.5%; age range 60 through 64 the payout is 5%; the age range 65 through 69 the payout is 5.5%, and so on.

So, when I hear an agent say; "Well I can guarantee you 7% for life. No worry." I just want to have him or her thrown in jail. Who is protecting the public, certainly not the insurance company, or agent's in general?

Agents call themselves experts. They are nothing but experts at finding the largest commission payouts and hustling these wishy-washy products in the public's face.

Let's examine a very interesting point that the agent does not want to mention for fear of losing the sale, and that is the internal rate of return the company makes versus the payout to the client's account.

Let's say the internal rate of return on its bond and preferred portfolio is 4.1% for an insurance company. The fixed index annuities administrative costs are 1%, so that leaves 3.1%. The insurance company payout for the income rider is 5% (that's a -1.9% loss).

Just like the long term care companies, the math did not work out in the long run, so they keep raising rates until the forced themselves out of business (or out the long term care market). The same will hold true with fixed index annuity companies, selling these income rider guarantees. The insurance company can only sustain negative losses for so long, until they get out of the business or be taken-over by the insurance commission.

I want to explain also a little secret that insurance agents do not want to tell the public. If an insurance company is taken over by the insurance commission, the asset will be soldusually for a 25% discount on the dollar. This means that all guaranteed annuity payouts will suffer a loss of 25%. Take for example; a payout per month of $100 before the insurance company is sold, and the month after the insurance company is sold, the payout per month would be $75 from then on.

Your objective is to solve for maximum monthly income, yet make certain you never run out of money in retirement. Then, I have a solution for you. In addition, you want to make certain you are connected to a high quality annuity company that will be around for the next 100-years. Go to our website and get our FREE copy "10 Things You Absolutely Need to Know before You Buy an Annuity".

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