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Annuities that pay 8% “guaranteed”?

Discussion in 'Topical Discussions (In Depth)' started by Carrion Crow, Sep 2, 2011.



  1. Carrion Crow

    Carrion Crow Site Supporter Site Supporter Seeker

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    I saw an ad in the Atlanta paper for a financial firm that is selling annuity products via American Equities. They claim you will get a 10% signing bonus along with the guaranteed 8%, that's 18% in the first year! Then you will get a guaranteed 8% for the next 14 years.
    How can they claim that?
     
  2. Not Sure

    Not Sure Banned

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    Because you will never see your money again.

    High return = high risk

    Unbelievable return = unbelievable risk
     
  3. budfox

    budfox I have become comfortably numb... Midas Member

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    Aint that the truth, You'll get your interest for a little while.....:bear_w00t:

    It's return OF principal you want, not ON principal.

    Call up and ask what the commission is on such a product..
     
  4. EO 11110

    EO 11110 He Hate Me Mother Lode

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    the annuity must be invested in gold/silver
     
  5. Carrion Crow

    Carrion Crow Site Supporter Site Supporter Seeker

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    I did.
    They pay the sales agent 5%. Between the 18% signing bonus and the 5% commission they are out 23%, in the first year...
     
  6. Gray

    Gray Silver Member Silver Miner

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    I got the same offer, but it sounded much cooler coming from a Nigerian princess
     
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  7. Meetzos

    Meetzos Gold Member Gold Chaser

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    Just like a bank offering 3 or 4 % more than anyone else in the area. The next time you go by the bank there are 5 or 10 black SUV's in the parking lot. And maybe they find a buyer for the insolvent bank, maybe not. If not then you have to wait for the FDIC to get your money back, interest free of course.
     
  8. Oldmansmith

    Oldmansmith Midas Member Midas Member

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    8% "Guarantee" from a corporation that can dissolve in an instant...

    Sounds like a great deal compared to 20% per year from PM's buried in the ground.
     
  9. Irons

    Irons Deep Sixed Mother Lode

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    .................
    laughingmouse.gif laughingmouse.gif
     
  10. elroy

    elroy Silver Member Silver Miner

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    I got a call from an acquaintance about 6 weeks or so ago seeking advice.

    He had been approached on this exact deal. He was unable to explain to me how the company would generate 8% return guaranteed.

    Obviously he did not understand the product and we were both aware the claims would be hard/impossible to accomplish in the current ZIRP environment.

    I issued the appropriate warnings and he dove in and bought $100k worth.

    I hope it works out for him.
     
    Last edited: Sep 3, 2011
  11. Gray

    Gray Silver Member Silver Miner

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    Uh, I may not be the most financialy inept person in the world. But doesn't a signing bonus mean they match 10% in your stake?

    So, you invest 100K, they add 10K, total 110K

    One year later, you get 8% of 110K = $8800 NOT $18000

    Am I mathing this right?

    And then, is the 8% a return, or a payment plan?

    in other words, do you still have your initial 100K at the end?

    if not, you are getting a return of 32% after 15 years....which is ****....oh, provided they survive and it is not a 419
     
  12. Carrion Crow

    Carrion Crow Site Supporter Site Supporter Seeker

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    This is what I was told.
    Say you start with $100K. They pay you a 10% bonus for signing up.
    So, now you are at $110K.
    You would be paid 8% of the $110K ($8,800) each year for 15 years. That’s not deducted from the $110K, that’s still there. After the 15 initial years (this is my favorite part) it (the $110K ) is put in some sort of structured note that goes up relative to the dow average. But doesn’t go down if the dow drops.
    I’m with the consensus here that it sounds fishy.
     
    Last edited: Sep 2, 2011
  13. ttazzman

    ttazzman Gold Member Gold Chaser

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    They are probably buying PMs with your money
     
  14. Carrion Crow

    Carrion Crow Site Supporter Site Supporter Seeker

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    More likely houses in the Hamptons and fake boobs for their wives.
     
  15. ~BS

    ~BS Gold Member Gold Chaser

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    The way these things usually work is : you dump in money into the annuity, say 100k. After 10 years (or however long), you start drawing down the balance at a rate of 8%. Say that 100k increases to 130k after 10 years. That means you can draw down $10,400 until the policy is depleted.

    They're paying you 8% "guaranteed"... but the payment includes your original principal as well as whatever capital gains or losses on that amount. If the policy generates no return, then they're paying you 8k/year of your own $100k back.

    Not exactly sure how the math works out, but I doubt you'll be able to start collecting immediately. Probably a stipulation that the money has to be in there for 10-20 years. Possibly the return is based on the principal amount and not including any returns. If that's the case, then the return amount can be stretched over a longer period. A straight 8% drawdown should last 12 years, but if you tack on returns, it'll last longer. And you know your balance will be $0 after the 14 years right?

    Example:

    year 0 100,000 balance
    year 1 82,000 balance /18,000 return (100,000*.82)
    year 2 78,000 balance / 8,000 return (82,000* (1-.08+.04) They pay you 8% of the principal, but figure they can make 4% on your money


    Using this calc, your money lasts 21 years assuming a 4% return. But most of the payments you're getting is your own money. Are they going to let you draw down the entire amount? I dont know. Will there be high fees for this structured savings plan? Probably.
     
    Last edited: Sep 2, 2011
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  16. platinumdude

    platinumdude Gold Member Gold Chaser

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    Is Bernie Madoff doing dealings from his cell?
     
  17. Book

    Book Banned

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    [​IMG]

    Make sure that guarantee has an official authentic gold sticker.

    :flute:
     
  18. Unclad Lad

    Unclad Lad Rhodium Imam Gold Chaser

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