Personal Investments • Re: Talk me out of these USAA annuities

It sounds like you've had a negative experience (or maybe multiple experiences) with an annuity. Maybe it was one that you purchased, or possibly a family member or friend. There are many annuity "horror stories" out there, and the sales practices used in many sales of indexed annuities and variable annuities are (in my opinion) terrible.

So I'm not trying to say that your personal view on annuities is incorrect.

But I do want to clear up a few inaccuracies and misconceptions in your posts.

I appreciate that. I have had multiple negative experiences with annuities. More importantly, I've never seen an annuity that was optimal. Thus the persistent nagging and general grouchy attitude. I really would like to know if I'm wrong, but it seems highly unlikely. Even if you are right, and there is some silver in this mound of bull crap, I can think of a lot better uses for my investments than sorting through this particular pile of bovine excrement called "annuities" in search of one that isn't parasitic.

But you misinterpreted my comment about the "1% for administration, etc." That is an "internal load", an approximation of what the insurance company spends on other expenses.

It is not a load assessed to the policyholder. The policyholder earns 4.85% on his/her Reliance Standard MYGA for 10 years. Period.

I need hard proof here. Every single experience I have had to date tells me that what you see with annuities, of any flavor, is NOT what you get. If you have an example of an actual MYGA, ideally one that is close to its maturity/expiration, that demonstrates on NET--after all fees, commissions, surcharges, costs, and any other synonym for fee they can come up with--the actual return stated is in fact the return earned, I'd really like to see it.

Two of the companies on this were owned/controlled by a person who has been convicted of felonies related to his conduct with the companies. In all candor, I've never heard of the other four companies on this list.

Insolvencies of insurance companies are certainly disruptive for the policyholders involved. Insurance guaranty funds provide protection for policyholders, but I'll concede that an insurance receivership takes more time to resolve than a bank failure.

That's the risk. It's always after the fact when we find out which kind of unseemly persons were in charge.

I'll note that no major insurance companies went into receivership during 2008-09, which I believe was the most disruptive financial event of our lifetimes. Even the life insurance companies of AIG paid all claims in a timely fashion, as the credit default swaps that were at the center of AIG's problems were not written by the life insurance companies.

On the flip side, we had over 30 go belly up in the 90s, when were not under financial stress at all. Rather the markets were booming. Thus far I have said nothing about the aggressive and abusive sales practices that the compensation structure of annuities invites, but it needs to be stated. OP personally experienced here, and I'm not in the least bit surprised. Annuities salespersons, in my personal experience, are sharks. You are the prey. It seems like very good advice to me to tell anyone and everyone I know not to swim with sharks even if perhaps one or two of them might not be interested in devouring you. Guilt by association is the burden I think you are obligated to overcome. "Fool me once, shame on you" is my credo when it comes to annuities.

I'm not going to debate this point.

I have my view. You clearly have your view.

I'll do what I think is in my best interest. You should always do what you believe is in your best interest.

I think the most charitable I could be is to presume you have found the exact right combination of type, issuer, and duration of annuity to make the product have slightly better returns than a comparable maturity treasury bond portfolio. I have a very hard time granting this given my hard experiences being, without exception, exceptionally negative, and no hard examples of the kind of product you describe. Given that the rest of the world of annuities is laden with sharks, I think I can be forgiven, excused and perhaps considered rational for insisting to my friends, family and strangers on the internet that if they value their wealth, they should steer clear of annuities. If 99% of annuities sold are predatory, I find it foolish to insist that "not all annuities are bad". While technically true, it's bad advice. I will do what's in my best interest, but I think we should also be looking out for the interests of others.

I maintain the convoluted and various risks are not worth the reward, though I concede there are possibly (as yet unverified) situations where a MYGA Annuities from trustworthy, high-quality, low-cost issuers might actually exceed a comparable duration treasury bond, as was my original contention.

Best to you as well. Thank you for your time.

Statistics: Posted by DesertFarmer — Sun Jul 14, 2024 11:32 pm

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