What Is An Annuity And How Does It Work?
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- Опубліковано 20 лис 2019
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If she went to them freaking out about the volatility of her account and said "what can you do so my account value doesn't swing around so much" then they did EXACTLY what she asked. They're not financial planners, they're account managers, she asked them for a product with different characteristics and they executed the request.
Robert Smithers yes however that’s like saying you come to me thirsty and I give you salt water- no excuse for them not explaining but also her fault for not verifying
@@genejohnson2738 If you run a supermarket and I ask for salt and water and you sell me salt and water then you have done your job. If you are a dietitian and I ask you if salt and water is the best fluid for me to rehydrate with then you have more responsibility. A fund manager is like the supermarket owner, they sell products requested by customers, they don't have a fiduciary responsibility and in many places have committed an offence if they provide financial advice about the suitability of those products. A financial adviser is more like the dietitian, they have a responsibility to provide competent advice in the customer's interests.
Robert Smithers thank you for the clarification.
They should have beta weighted the portfolio, so it had daily p/l swings of no more than 0.2%, not put it in annuities which make nothing in real terms.
The "account managers" took advantage of the situation, plain and simple. They're weasels just like the ones who sell Whole Life insurance. They didn't have her best interest in mind. Annuities are terrible investments. The fees/commissions they (you) charge are ridiculous. It's a mutual fund inside of an annuity. I can buy mutual funds without paying the fees/commissions that these pos insurance companies charge.
Dave’s body language when she mentions annuities, is priceless.
Lol facts, told us everything we need to know.
Like when our new engineer came into our lab and told a bunch of car guys that she got a new car ... they were so interested, she knew it was red ... got it from used car lot ... remembered name OMNI ... lab went silent and got empty.
Means he has no clue about these annuities!
@1:01
That is the most fascinatingly incomplete explanation of an annuity I’ve ever heard someone give so confidently.
Yeah... it's almost like he's paid to do that....
I came to Dave's channel to hear what not to listen to. Lol
I've had an annuity for years and it's done nothing. It's my single worst investment. I'd sure like to hear why this doesn't tell the whole story.
An annuity is the bottom of the barrel when nothing else is available. An IRA, 401k, whole life, HSA or even a brokerage high yield savings acct are vastly better options.
lololol came here to say this.
My spouse and I are adding a variety of stocks/ETF to my present holdings for the long term, We've set aside $250k to start following inflation-indexed bonds and stocks of companies with solid cash flows, I believe it is a good time to capitalize on the market for long-term gains, but it wouldn't hurt to know means of actualizing short term profit
The current market might give opportunities to maximize profit within a short term, but in order to execute such strategy , you must be a skilled practitioner.
@@sherryie2 A lot of folks downplay the role of advisors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for license advisors and came across someone of due diligence, helped a lot to grow my reserve notwithstanding inflation, from $275k to approx. $850k so far.
@@corrySledd Over the following 3 months, I want to increase my reserve from $280,000 to at least $550,000. I would be grateful for any advice you can give on how to accurately predict the market and how to diversify and balance my portfolio in order to accomplish my goal.
@@corrySledd Thank you for this tip. it was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her résumé
My mother has a fixed annuity that is paid up. She was allowed to withdraw some money at any time. The annuity was one of the best things she did because it was a passive income that kept her afloat for a few bad years.
That was dumb
@@rernardallison807 not really. To this day she gets hundreds in free passive income from her annuity alone monthly. Collectively I have her earning north of $1k a month passively and never have to worry about her money being lost. Thanks for your wisdom though.
@@rernardallison807 Thanks for your wisdom. She's doing well, growing her savings well into retirement and never worried about emergency expenses. The annuity was the best thing she ever did. Coupled with high yield rates in banks she's making more than some people going to work.
How so?@@rernardallison807
You’re mother got scammed
I work for an annuity company. Annuities are best purchased when you talk to an actual firm and an actual licensed fiduciary advisor, and you have a looooot of money to invest. Some of the richest people in the world have annuities.... not middle class. Fixed annuities are never the answer. Index and Variables are the way to go if anything. Fixed annuities are only necessary if you have a 401k or something you wanna roll over to get guaranteed income for the rest of your life.
How much is "a lot of money to invest"? Is $750,000 a good amount for an annuity?
@@disco4535 Most good insurance companies require you to have at least 100k liquid.
@@disco4535 you can start an annuity with as little as 2,000. Some companies 5,000. Depends on if it is a rollover or if it is cash, and the carrier you use.
Will that be better annuity be better than a roth
@@MrIgonzalez85 Roth's are the better option for growing. Annuities are better for preserving. Stick with a roth until you're at least 60-65.
The fact that Dave instantly grabs his head just as soon as she says “annuity” tells you all you need to know in the first minute of the vid!
He’s grabbing his head because he doesn’t know what he’s talking about.
@@trevormaxwell3703 So tell us how it really works.
@@TheFishdoctor1952 I'll tell you. The woman had $500k in retirement. The only way Dave's dislike for annuities work is because annuity money is as accessible as other cash. He tries to make things simple. He had to exaggerate a reaction. The right response to this woman was, you did a great thing. You invested in something that will keep giving.
@@trevormaxwell3703 He’s just become a multimillionaire for making many mistakes! Don’t speak when you don’t know what you’re talking about! You judge somebody by the record that he holds and he is very successful doing what he’s doing! So he’s doing something right correct?
@@robertlulek1634 he’s become a multimillionaire because he has an incredible branding and marketing team, if you want to be able to live like him, stop taking his advice and learn how to CREATE wealth.
This is a very specific and fragmented view of annuities. For the caller in this video, she was worried about the value of her assets moving up and down, and her advisors suggested a partial investment into a product that provides stable income and then she wouldn't have to worry about all the volatility. The advisors could have chosen other products but to calm someone who cant sleep at night...they offered her a solution. For someone her age(im assuming she's 30-50 years old) it's probably best to invest in mutual funds for the long term, but that isn't what she asked the advisors to do. It's easy for Ramsey to sit there and critique
I agree with you. There is multiple Annuities in the market and people should select based on their need. I'm working client on annuity that will return them minimum 6% and max 14%.
Bingo. I can’t believe he said a fixed annuity is NEVER a solution. I’d rather get a fixed annuity than a volatile variable annuity if I was in or near retirement. The advice wasn’t bad and potentially would be ideal if she was retiring. Why would he suggest mutual funds with their ridiculously high fees? If you can’t navigate securities maybe some ETF.
@@BamifunI dont have the energy to respond to Dave but what you said!
There are NO fees on fixed annuities.
3:12 for definition of annuity
You're a genius. Here's a 😘
Thank you, bro!
Thx
Not all heroes wear capes. Thank you.
I'm so glad I didn't fall for an annuity when my bank tried to sell it to me years ago, my gut instinct told me it can't be a good thing if my money was frozen for ten years.
@Truth Genie A bad investment vs a bad illiquid investment. Ill take the former if forced to choose.
is every subsequent payment into the annuity frozen or you just have to wait 10 years from when you start the annuity to be able to dip into it without penalty ?
Everything about this call is messed up. Her job is offering her retirement plans all of which will have a penalty if she moves money too early. They advised her to move some money to an annuity because she can avoid the market volatility. Dave lies by using the word “probably”. Fixed Index Annuinties averaged 9% in 2023. And while mutual funds lost 17% to 25% in 2022 fixed index annuities lost 0%.
@@Chris-es3wfMutual Funds are not liquid. Who told you that? Whoever it is you should confront them and let them know they lied to you.
@@twoods3364mutual funds are liquid. You can sell them and buy something else, or cash out, in a couple days.
That is clearly a liquid product.
She was freaking out about volatility and they helped her reduce volatility. It's her fault not the consultant's fault that she regrets it.
100% She was spending too much time looking at her 401k. Set it and forget it.
They shouldn’t just put her in an annuity, the right thing to do would have been to beta weight the portfolio so the sharpe is then higher, not to put it in an asset that makes nothing!🙄
Romil Patel What makes you say an annuity doesn’t earn gains?
Daniel Leon
After inflation of 3% an annuity only makes in real terms 1%. A proper actively invested portfolio should make 30% in real terms.
Romil Patel I have a client who earned 28% in her Variable Annuity. Your statement is inaccurate.
Is that YETI tumbler glued to the desk? It never moves! 🤣
we gotta stop this and take responsibility for our finances!
It's sad how Dave continues to speak on products he does not really understand but plays the part for his listener's. Stay in your lane Dave, and stick with the baby steps program as that and your marketing team is what got you to where you are.
What was wrong with his advice to this caller?
Nothing Derrick doesnr get it
Derrick I totally agree!!!! Fixed Indexed annuities are great products and I am pretty sure Dave doesn't know everything there is to know about them. Unfortunately there are a lot of people that take everything he says as gospel and don't do any further research which can steer people away from something that might be in their best interest.
I've been teaching financial professionals for the past 11 years on annuities. What happened to this caller is unfortunate and irresponsible of the company. With that said, Dave's explanation of annuities is skewed, generic, and high-level. There are no 40% surrender charges. I know Dave's being facetious. There are roughly 12 different types of annuities, not 2, and Fixed Annuities are paying over 3%, not 1% - 2%. When this video was uploaded, fixed rates were close to 4%. You don't pay extra fees for all annuities. Typically you pay fees for an additional benefit like an income rider. There are annuities without surrender charges (Return of Premium) and short term contracts. I like Dave. I respect Dave. I don't think Dave is very educated in annuities, and I don't expect him to be an expert in every financial product. A jack of all trades is a master of none.
@Phoenix The problem is that what you pay gor the annuity can be invested conservatively in fixed income products for better cashflows. As a financial professional, I'll just leave you with the tidbit that annuities carry the highest sales commission of any personal financial product... that tells you all you need to know.
Saying “never” is irresponsible because he has not sat with any clients and has no clue of the situation, clients risk tolerance, goals, debt etc. getting financial advise from a guy on TV is dangerous.
Fixed annuities are HORRIBLE investments. After fees/commissions are paid, the ROR is around 1 - 2%. You're being vague about the pitfall of annuities. They're just savings accounts with an insurance company. The variable annuity gets invested in mutual funds while charging the client extra fees,
Is'nt Dave really just opposed to salespeople taking huge commissions from Annuities
@@nickstrapko7549 Nah dude, he's against people getting ripped off which is what annuities do to the consumers.
Company sponsored financial advisors just aren't very good ... had the same experience as this caller.
Wait, did Dave Ramsey just advise that lady to remove her money from the annuity without even hearing what the rate of return was, or knowing any specifics??? This is the reason why people with no investment licenses should not be advising people.
He specifically tells her to look at the return rates because he knows they’re lower than any common mutual fund. Are you retarded?
Why would she purchase an annuity without understanding what it even is?? 🙄🤷♂️
90% or more of us don’t know how it works including myself
Asian don’t raisin Phạm EXACTLY why you shouldn't buy one!
@@hoanpham2757 Ya but the point is it was stupid to get one without looking up what it was
Asian don’t raisin Phạm that’s his point. I assume you wouldn’t invest $150k not knowing what it is.
Why would you take a prescribed medication without understanding what it even is?
I was an annuity for my mom when she divorced my dad.
@Josh lol
I'm so sorry
That's a popular one
If I don't understand it I WON'T BUY IT OR I WON'T INVEST IN IT.
I concur, I have that exact same mentality and that's why I'm still single :(...
I agree with this but a lot of people don't
Thanks UA-cam for showing this to me, the first time I considered annuities :) Thanks Dave.
Wait! So you listened to a 5 min video from one person and that's all you needed to not get an annuitie? Sheesh man, that's not good
Mutual funds aren’t the only options To make money, the fact that they took advantage of her was really wrong, because they didn’t plan the whole annuity right. Remember everything has to be structured correctly, and the Annuity that was done for that person was done horribly wrong, but it doesn’t mean an annuity is bad. There are companies and agents who work on fixing this that can actually help. And when he mentions that there isn’t an annuity that can’t help anyone, he is also wrong as well. Just as much the stock market isn’t for everyone, nor real-estate, and just as much Life Insurance. Do your own research talk with life insurance companies talk with investors, read books and not get one side of the story. Learn and grow!
Let me ask you. Are you a Investment Representative?
For comparison, if money had been invested from Jan 2019 to Dec 2019 in a portfolio of 50% Bond Fund (VBMFX) and 50% S&P 500 (VFINX), then your return would have been 19.97% over that period of time. She missed out on high returns in Mutual Funds, and the tax deferral was NOT needed because it was already in a tax deferred 403B. I would complain to the insurance department in her state, and have lawyer send them a letter to undo everything, to not pay the surrender charge (penalty).
Also in my opinion, most Variable Annuities have very high fees, and are not necessary for the majority of people either.
A good adviser finds out the age, risk tolerance, debts, details on annuity and how much longer client is planning to work b4 they tell a client pay 10% penalty because mutual funds are paying 12%. Well mutual funds could pay 12% but they could also lose 30% that is why you need more information from caller.
My investment advisor is pushing annuities also. I asked her "when do I get my principle back?" and the answer was just too squishy for me. She's pretty much fired at this point.
The principal goes down as you withdraw your yearly. It goes against it. So you end up using the money as income. But if you outlive the annuity then is to your advantage. Then you start earning additional that you didn't put in. It was explained to me in a way that this is how I understood it.
Always be careful with this sales people. Especially for anything that concerns "Accounts or investment". Never make a decision on the spot. Ask for minimum 1 day to make a decision. USE THAT TIME FOR DEEP RESEARCH Before making any commitments..
H&W Lifestyle TV yeah I won’t even buy a car without sleeping on it. Deals NEVER disappear same day.
That been said. Don't get me wrong there are Genuine sales people out there. Not all are greedy. Personally I have met plenty of sales people who have landed me great deals so its all about asking for the time off for research if its a topic, or field that's new to you.
dave is a salesman too. he cross sold his elp before taking what may or may not have still been a solution for this lady to the woodshed without all the facts.
@@rhavard101 And your boss lets you sell your competitors products and services? Good to know.
i wish more calls were like this, when i listen to him live, its always some stupid people wanting to take a loan out on a car or some other stupid questions that they already know they answer to. I made that same mistake and costed me over 8 grand due my stupidity. I wish i knew about Dave before i signed up for universal life insurance, my surrender charge was about 8 K . only getting back around 4
Bannoura, I'm not sure why you made a decision to get into a universal life insurance product, but what was your goal? For example, fixed index universal life can be one of the best retirement vehicles on the planet. I would compare it favorably to a 401k or other plan almost every day of the week.
@@johnnyvegasretirementplann5442 i was stupid. I got out, lost 4K, but glad i got out
@@Steven-yx1ic Do you mind my asking why you feel you were stupid? I know that IUL's are long term solutions for retirement as opposed to short term "investments." I am curious what your initial intentions were. Thanks for your help, I am always trying to understand motivations.
we are for fasdfsadfasdfsadfuassdfsafrssdfdsafsadfsdfsafsadfasfasdfsdafsadfsdfsafsadfsadfasdf
Yeah why would those people ask stupid questions about wanting a loan from their 401k interest free that’s reliable to drive them selves to work and their kids to school. How evil and time wasting of them. 🤨 can’t stand people like that.
I believe there are certain annuity products that can be good but it is mostly based on your age. A person in retirement or near retirement who is looking for a GUARANTEED income stream may want to put a portion of their nestegg into an annuity. There are products with zero fees that have a low return and low risk and there are products with high fees that have more guarantees. A 70 year-old is hurt a lot worse by a market downturn than is a 40 year-old so removing risk is attractive. Taking risks as you approach retirement is for people with a LOT of money, not for people with $250k. Taking risks at 30 is how you get wealthy.
Dave's advice for getting out of debt is the best available but his investment strategies are not always the best. I was following his steps before I ever heard of him.
This. My parents retirement advisor took some of my parents into two annuities after they retired and they switched over their 401k and pension. But yeah I would never do this before I retired. I think my parents get like 3k from them every month.
@@hurshrd654 HI, excuse my ignorance, but what happens to the capital....and about how much gets you 3k a month?
@@ddddddno24 My parents invested close to a million dollars from My dads work retirement accounts. He had a pension he took in a lump sum and a 401k. After he retired they both got invested.
@@ddddddno24 With that 3k a month the principle doesn’t get touched. They can also take out up to 30k a year if they want to buy something big. They did that recently for a car down payment.
They. can also take up to 30k more a year if they have. Big purchase to make. They did that recently for a healthy downpayment on a car.
Finally! A new topic
Agreed. Another caller explaining how they want to keep their debt then getting whacked by Dave is only worth hearing 99 times. Ha!
Tanya, you didn't make a big mistake. You have $500k of retirement. You don't need to touch the money. I have something similar that a Ramsey sponsored advisor got me. Five years ago I put $82k in an annuity. It's now valued at $189k, that's a return of 19%. Dave is famous startling people. At the core he's good, but there are moments he's just blind. This is one of them.
Amazing- Annuity are good investment vehicle for the right age group
@@tshah90 What age group is that?
@@keithduchnicki349 if you have any questions please reach out to me
@@tshah90 Nope, I'm good!! Or, to barrow a tag line, "better than I deserve."
@keith duchnicki was that a fixed annuity or variable?
403(b) are tax shelters annuities and an annuity provides a life time stream of income. Life insurance protects you from dying to soon whereas an annuity protects you from living too long. Once again Ramsey just shoots advice and slanders without giving/knowing what he is talking about...
Right? If you don’t agree with his opinion you’re automatically a screwball, it’s wild to me
You don’t need an annuity inside a retirement account!
@@joycewright5386 Yeah but a annuity after you retire can be good. Taking part of your nest egg and putting it into one so you have a guaranteed income after retirement. You don’t want to lose everything in retirement and this gives you a guaranteed income.
This sounds like a TIAA CREF 403b. This would be the traditional TIAA part of the annuity. Her option would be to start a TPA (Transfer payout annuity) She can dollar cost average back into the CREF side of the annuity.
Ameriprise also has one of these. My wife's company put her into something like this.
There are also Index Annuities. Some offer 1% garuante and Uncapped Growth meaning you gain with the market. There might be a spread of about 1 to 2%. There is no management fees that eat your investment as mutual funds. There are no fees on Annuties unless you put an Income Rider or you pull your money before the surrender charge.
Still a terrible product!
Horrible product folks they ones that like sell them making BIG money on fees on top of fees !!
@@alinatamashevich3354 - By what means?
@@tioswift3676 They keep your money! By that means!
@@alinatamashevich3354 - Literally ever my financial advisor takes 1-2% of people’s ACTUAL hard earned money, every single year, in perpetuity, regardless of performance. Tell me why you’re totally cool with that, but not someone being paid (and NOT your money, the company pays the commission, not you) and ONLY ONCE on for?
Dave doesn't know math. You don't recoup after loosiing 10% by earning 10%, You need to earn slightly more than 10%
dave you need to read up on annuities. Please stay with what you know. An Indexed annuity is a suitable product with no market risk and good possible returns
News Now Uber when he said they only make 2% interest I knew he didn’t know what he was talking about. He has no clue. Indexed annuities have no fees and they can make 10% interest gains, or sometimes better.
An indexed annuity is a variable annuity what he was talking about was a fixed annuity.
Financial guys hate annuities because it takes away from their business. I will agree that in this instance a fixed annuity might not of been the best call, an indexed annuity would give better returns and addressed her worries about volatility in the market
Fixed annuities bad, I'm 71, in a variable annuity and feel good about it.
@@Phlfwlr Prove that!
I love immediate annuities. You get Income for life.
Yeah you just make 1/3 of what you could have stupid
There are NO free lunches, Carla
I have had annuities for many many years. I have never regretted my investments. It was not a free lunch. I bought the annuities. Have a blessed day.
THX
Thanks! helps me so much to understand what this is! :)
as a Licenced insurace agent, I CAN SAY DAVE RAMSEY IS NOT THE PERSON TO TALK TO ABOUT ANNUNITES OR RETIREMENT.
Right, let's talk the guy that sells you the annuity xD
So, Dave would you recommend LPL Financial or Fidelity Investments?
I've been w Fidelity since the '80s and have no complaints, but I don't use any of their advisor services. If you're looking to invest in mutual funds, you are not limited to Fidelity products as they have offerings from many other houses and often without transfer fees. Fidelity funds are no-load, and they now even have some w/o expense ratios, including FNILX, which invests in large-cap companies.
Where does Dave get his 10-12% average return rate from? Most growth mutual funds that I know of, don't bring those high returns (on average) over a 10-20 year period.
the biggest issue with Dave Ramsey is that he can say whatever he wants without accountability because he is not a registered adviser. He holds no licenses in any state. He makes total blanket statements that he doesn't know what he is speaking about. Remember, people, he is not doing this for charity. He is trying to get you to join his program, and is paid by the companies he endorses. How come he only recommends some of the strongest-rated companies? Only mid-tier or low-tier hint they pay him.
I was given the choice to take a lump sum at my husband’s death pay a penalty of 30% bringing me to like 40k or an Annuity for the rest of my life up to 100k but I do pay taxes on my monthly amount I only took it because over time it was more money for me.
Thanks for the great advice. You are a excellent teacher!
He’s a wack job
Not all annuities are built the same. Most allow for a percentage withdraw each year without penalty. You made it sound like all annuity contracts have a 7 year surrender period. FALSE!!
Are annuity commissions high?
over 10-20 years will be 5%-6.5%
A share market advisor charging 1% per year would charge between 10%-20% over that same time frame.
Depends on what kind of annuity, but 4-6% commission (one-time) is common for a fixed indexed annuity.
Imo, there is a lot of misinformation or lack of information in this short clip. I don't agree this was a wise investment decision, however, there are typically no fees on fixed annuities and fixed annuities are completely different than an income annuity. I'm going to make a video explaining the difference. Hopefully it will help clarify some of this confusion
Danielle, I went to your site but don't see the annuity video. I hope you do make it. It sounds like you know more than explained here.
@@ericksonsails Hi Diane. Ah thank you so much for the reminder! I just started YT so am still trying to get my flow of consistent uploads. I will do that for my next video for sure! My channel is a makeup channel for those over 30 where we discuss a finance topic of the day so I will include that topic for my next video this week 😉 Thanks again for reminding me!
Where is the video? I looked an its not there 😒
Since annuities are up for a visit, let us remember all the "pros" about a traditional deferred annuities. Dave, you are wrong about a retirement strategy that includes an annuity for diversity. A fixed annuity does not have a down side, in that one is 55 and pays New York Life $100,000 and receives a guaranteed monthly income for life starting at age 68. The money is safe with this company and one has "pre-paid" for a pension. One can possibly make more with that money but there is risk. If one already has an IRA, a pension, a spouse with a Roth IRA, and they will both be receiving Social Security then what is wrong with take part of their money and diversifying the retirement portfolio to include the fixed deferred annuity. Your influence is great Dave and I am a fan of yours. In this case, you may be doing a disservice to some when this product has a place in some retirement plans. A couple has, using my example, taken $100,000 and they know what the monthly will be at 68. Too many do not allocate properly in the market as the mature and no longer have the time to make up for a 25%-30% market down turn. Annuities of this nature have their place for some people. Thank you sir.
Thanks for that Todd. You took what was in my head and laid it out.
@@RobTheHandsome1 Thank you for your nice comment Rob. I appreciate it. Have a super day!
Cause it sucks to be robbed by New York Life is my answer. No sale.
Especially lately!!!
Lol she's nor Eben close to retirement...if she went mutual funds she could easily stomach a 25% drop by retirement and still outperform her annuity...
Are Nassau and AllIanz good annuities. Fees are .095
After listening to this. This remind me of a story if me trying to help people not to sign up for annuities but people dont listen to me because at the time i was only 20 but i had learn all of Dave's techniques and had a great teacher. Now all those people have regrets i just sit there and laugh after years later I guess at the end of the day it was their money and of course i told myself I tried. No regrets.
I find it INSANE that he automatically said, "it was a huge mistake" without having ANY knowledge of how the annuity was set up, what the interest rate is, or what her full financial picture looks like, or even knowing her age. Then he calls licensed financial professionals "screwballs" and "idiots" and then directs people to his network. Then he says her annuity is "substandard with a horrible rate of return" when she doesn't even know what rate she is getting, and neither does he. Ramsey has no insurance or brokers license and has no business advising people.
I was going to make a similar comment. His "SmartVestor Pros" all charge upfront sales loads as high as 5.75% on the mutual funds they push.
Lemme get this straight. Lady says she doesnt want risk. Tbey give her a product with no risk and Dave says terrible mistake. Put it BACK into an asset class that she didnt want in the first place. And i see this quite often. People always say they dont want risk but dont really understand what risk entails.
I’ve recently helped 2 other teachers determine their annuity through the teacher retirement system and how they can supplement it with a Roth IRA.
The fact that her employer offered this “service” says a lot.
Annuity normally has a terrible surrender charge in the first year! Insurance sales people make a killing selling these things.
The point is not to surrender that money you’re investing
And so does every financial advisor out there. Your point?
@@tioswift3676 Caveat Emptor
@Terran Because you lost your job, went into the hospital, wrecked your car, wife ran off with your best friend and took all your money, nuff said??
If you need to surrender an annuity in the first year, you probably shouldn't have an annuity. You have to be suitable for an annuity (of which there are different kinds) to even be considered for one. Someone who needs that money right away wouldn't be suitable
As someone who has been in finance going on 24 years; 15 of which have been FIA's, or "annuities," Dave doesn't ask the right questions, although this one sounds way too young for this to be suitable. As far as Qualified or "retirement" money? That depends on the goals and objectives of each individual. Dave: did you know that there were a few FIA's that beat the S&P a few years ago over a 10 year period? So the investor was not only guaranteed not to lose a dime, but beat the S&P? That's not what these products are made for; as Gene Rogers once said "I'd rather have a return of my money than a return from my money." Also, other than safety in lieu of grand growth, these also are great lifetime income additions to add to SS needs that aren't met. I've watched far too many seniors go through 20% of their assets per year thinking it'll always be there. Love ya Dave, and think you are great at debt relief. As to investments? May want to stay in your wheelhouse. Cheers.
Agree 100%. He needs to stay in his wheelhouse.
Well said! Fact finding is everything with annuities. Asking the right questions to deem if it’s a suitable sale. There are a lot of different types of annuity products that are designed to accomplish different goals. Annuities aren’t bad, the product just has to make sense for that specific client.
Jim, you seriously think a man worth more than 250M has clueless investment advisors? Sounds like you collect a huge payout selling this garbage. Adios Jim, move along nothing to see here
@@freedom1856 You cannot afford his investment advisors, Free-Dom. Stay in YOUR lane.
@@alinatamashevich3354 you are the only one who is ignorant here.
I need to call my banker and see how I can get out of my annuity.
So Dave is talking down on TIAA Cref?
He really does.
The 4% rule is still the go to for most retirement advise.
Which means if you needed $2k a month you had to earmark $600,000.
You can find annuities that guarantee around 6%.
So for $2k a month you need closer $400k in an annuity.
No annuities guarantee 6%. Income riders have roll ups between 5-7% that go to an income base which calculates a guaranteed lifetime withdrawal benefit amount. Be careful how you say certain words please. Makes us agents/advisors look bad
@@danieldiehl1649 At the time that this was written there were annuities guaranteeing 6% withdrawals from their income base. Meaning if the account went to $0 it would still pay.
The 4% rule has no such protections and REQUIRES a larger initial deposit to get you your desired income.
Today the point is moot because rates have dropped to the floor.
My fault, I thought you meant 6% return but clearly after re-reading you meant 6% as like a payout factor. I apologize!
Is asset protection perhaps a reason for an annuity. I thought money in an annuity can't be reached by creditors. Anyone know?
A guy selling insurance told me that. A way to protect your money from creditors, wives etc is to put it in an annuity.
good
I don't know...depends on your age..and how much you got to put in the annuity..if you're near retirement age drop a huge chunk in there..that annuity will pay you for life!
No free lunches. Learn that and repeat it over and over till you live it.
"A fruit jar at least doesn't penalize you." Never heard that one before 😂
That's why I like a variable annuity.
what part of the annuity varies with a variable annuity ? thanks
i am getting a malpractice settlement but i cant get the full settlement in a lump sum because o will lose my disability and medicaid/ medicare insurance my attorney wants me to put part of it in an annuity and in a special needs trust should i go with the annuity?
Annuities are great options if they are suitable for the investor.
Surrender charges only occur if you take the money out early. If she doesn’t need this money before she retires, the surrender charges don’t come into play.
Annuities are great for people who want to contribute above the IRA contribution amounts, and are not worried about liquidity.
If this woman was worried about volatility, she should have been put in funds with more bonds in them.
You apparently missed the part about getting subpar returns on annuities
It sounds like she might be in TIAA-Traditional ie she says "403b", "10 year payout", and "traditional". If so it can be a good base for retirement and part of a sensible asset allocation. TIAA-Traditional also pays more than CD rates and there'll be no surrender charge for the 10 year payout. Ramsey can be a real hot head sometimes and doesn't seem shy about giving advice on what might be incorrect assumptions.
what if you are setting up a annuity at a fixed monthly installment in order to use that income as monthly income to qualify for a Home loan ?
I think you may be right. You can also qualify for Medicaid buy buying an annuity. Worth no matter what fees there are.
@@slipstreamf1racing944 DUDE what kind of stupidity is this? You need to be dirt poor to qualify for Medicaid in any state (at least as far as the state knows). Any Medicaid application will ask about assets, including annuities.
Finally new topic 🙏🏾😅 yeaaah
what is an annuity begins at 3:15 he doesn't really explain what an annuity is.
Probably because he obviously doesn’t know.
I don't mind the idea of an annuity once you are right up against retirement age and ready to play a more defensive game with your savings but as Dave said there are better ways to play that game. Personally, I would start moving things into bonds over annuities.
There may be a annuity bail out provision that can be exercised in this case... seeing that she’s only seeing 1% of her money but idk 🤷🏿♂️
Dave with the new retirement account changes are going to see a lot more annuities and other trash financial products in 401ks. Can you look into this?
then whats the point of annuities for life insurers to profit?
VA can do pretty good. Fees are like 1.25 percent
in before the insurance salesmen start commenting to defend annuities.
what about her sleepless nights with mutual funds? What do you recommend? All ears.............
@Jacob Derman only works in books, not reality.
Jacob Derman and forget and come back and look at it now and realize ever since corona your account is down another 20%
He said there's only two types of annuities. 🤣🤷♂️ Dave needs to educate himself. Annuities are great replacements for bonds.
Jacob Derman Yup! Discipline to not check it but once a quarter and just keep shoveling it in.
Lol when he put his head in his hands I started laughing.. can you imagine the flow of language coming out of his head?? Hahaha
The market has not averaged yearly returns of 10-12% for years. It’s more like 4% since 2000.
Annuity rates are over 5.5% now that interest rates are up.
The fees in an annuity is the same as what Smart Investor pro will charge you.
Your financial advisor should not only be securities licensed but they should be a licensed insurance agent as well. There is absolutely a place in personal finance for annuities. Such as right now!
Where are you getting the number for 4%? Since 2013, the s&p has averaged around 11% and I think 8-9% since 2000. Im just curious?
@@ChrisP-yes. My large account with a variety of mutual and index funds has averaged 10+% for the last 10 years.
I have a technology mutual fund with Fidelity that has averaged 17% for 10 years.
Holding quality mutual funds for many years and not playing with them works very well.
Thank u was thinking about that...Never Mind I need all my #$$
To be fair, she said , she can’t sleep with the 20k volatility so the risk she indicated , annuity is the ultimate answer. Imagine her risk matrix and you leave advisor no choice.
Question..what if a person has a fixed annuities for life by transamerica. Does the Annuitor own the policy? Or does transamerica corporation own the annuity policy? O thought annuit is same as owner
What about a index annuity?
Thank you!
Thank you for making it easy to understand, Dave. Much appreciated!
He didn’t, he simply created a negative stigma around a great financial vehicle for retirement
Would it be a good idea to rollover a 401k into an annuity?
What is an growth and income annuity?
My mother NEVER comes to me for advice and she got scammed into one of these stupid annuity things. So frustrating...
Now you can get a myga for 4.5% or his mutual funds in negative territory. Annuities now protect your premium 100%
why do you think these guy's offered to give your company's employees free financial health checks? they were trying to sell a product. Any time someone is offering you something for free always think "what is in it for them?"
Expecting the s&p500 to keep going up 10-20% a year is foolish.
You never know when another 2008 event will happen.
No one expects the S&P to always go up 10 to 20% a year. However, there are other mutual funds in particular aggressive growth funds, that do have a track record of 10% or more a year for the past 30 40 years.
@Indio Hatuey and it will go up again. I got in to stock when the down hit 22k. I got out once it hit 29k. Now, i am looking for the bottom of this dip. I was eyeing getting back in when it slipped under 25k again. But we'll see.
ineedhoez hopefully you didn’t “buy the dip” after it slipped under 25,000...since it just 18,917 today
@@laynegibbs1097 lol buying the panic doubled my retirement fund this year 🤣🤣
After watching this I'm definitely a fan...
Terry Joshua he’s so wrong thou
I dislike annuities as much as Dave does, but he is giving such a poor description of what they are in the second half of the video. An annuity is simply a series of payments made at equal intervals. The payout period can be for a fixed term or based on the life of a natural person. Later, a second class of annuities was created, called a deferred annuity, which allowed for an accumulation/growth phase to occur prior to annuitization. Then deferred annuities were segregated into fixed products and variable products, with some products allowing additional deposits during the accumulation phase.
Also, he did a poor job addressing the caller. It was pretty clear to me that she has a 403b with TIAA CREF, and that she was advised to allocate a portion of her account balance into the TIAA Traditional subaccount, which pays a fixed rate and cannot lose value. TIAA Traditional has a liquidity provision that exiting must be done over a period of no less than 10 years (which is why she correctly mentioned this).
The TIAA Traditional product is a uniquely wonderful product as a component of the bond portion of an investor's portfolio.
Why would anyone buy an annuity when social security is basically an annuity itself, in that it’s guaranteed income for life?
I have never been a fan of annuitys. Especially when you run the present value of the future stream of annuity payments.. it is usually not a favorable investment.. there is always something better!
That's because it's not an investment. It's INSURANCE. You are betting that you will OUTLIVE your investments if drawn down on perpetually, and/or that the market will take a downturn some time before you die.
The idea isn't to get rich. If you are buying an annuity you should already be rich.
But trying to turn an annuity into an investment with a deferred annuity? Yeah, that's a poor investment because like Whole Life you are tying INSURANCE in with an INVESTMENT. BAD. IDEA.
Darin Herrick i never thought about an annuity as more of an insurance policy. Good point
What about indexed annuities? You don’t lose once it’s in the stock market.
3:10 he gives the definition.
1:02 😂
Annuities promise a guaranteed income for the life of the purchaser. What they don't tell you is that if they go broke, your monthly checks stop and the money you paid in up front is gone like the wind.
Not true buddy, Annuities is a guaranteed product, with a history of about 150 years.
@@yitzchokschwartz3699 the money isn't insured though, so if the company does go broke and the money is gone then its gone
@@TheOneTrueNoNamenot true. Sure they are not fdic insured but they are backed at the state level. NY for example protects up to 500k.
So what is an INDEXED Annuity?
I own my house ...no mortgage...my intent is to leave inheritance for my child's children.. recommendations welcome. I was contemplating annuity for myself. for later on if I ever decide to retire. ..
Just get a will made.
@@astroman30 probate?
@@cherylbalogh6098 The federal inheritance tax stars at $11.7 million. Most states don't have an inheritance tax. The ones that do (Kentucky, Massachusetts, Maryland...etc.) start between $2 million to $5 million. Even if you do fall in that category, seek advice of an estate attorney before going out band buying a trash value policy.
@@astroman30 probate is different than inheritance tax, right? Is the person leaving a house to the kids?
@@cherylbalogh6098 Estate tax vs. inheritance tax. The only difference between inheritance and estate taxes is the person who pays the tax to avoid probate. Unlike an inheritance tax, estate taxes are charged against the estate regardless of who inherits the deceased's assets. Again, same rules apply.