馃攳
Annuities: Choosing a Variable Annuity? - YouTube
Channel: unknown
[0]
Dick: Right.
[0]
Eric: The first thing is what's the best
[2]
flavor? Annuities come in a lot
[4]
of different flavors. It's better than
[5]
Baskin Robbins; 31 flavors would be
[8]
just enough to compare but when we look at
[11]
it, what's a variable annuity?
[14]
Dick: Why don't you talk about variable
[16]
annuity for a minute? Who would
[18]
typically be a good person, where a
[21]
variable annuity would work the best
[23]
for?
[23]
Eric: When I think of a variable annuity
[25]
candidate, they're typically
[26]
younger. Time can heal their wounds,
[29]
because they can be invested in the
[30]
market for a longer period of time. And
[33]
why do I say invested with a
[35]
variable annuity? Typically, you're using
[37]
a wrapper, the tax advantage
[39]
wrapper of a variable annuity, to buy
[41]
mutual funds. You get the tax
[43]
deferral principals. You're taking the
[47]
market risk. You're accepting that.
[49]
Dick: Yes. The client accepts the market
[50]
risk.
[51]
Eric: The insurance company gives you this
[53]
tax advantage status. In
[54]
exchange for that you're going to accept
[56]
the market risk. There are some
[58]
other benefits, including basically, a
[60]
death benefit of perhaps, of return
[62]
of principal less what you've spent out of
[64]
it, which is the big piece of a
[66]
standard wrapper.
[66]
Dick: Yes, so the idea is that with a
[70]
variable annuity, I'm going to take
[73]
the investment risk. However, if my
[75]
investments lose and I die, I get my
[79]
money back.
[80]
Eric: That's right. Well, somebody gets
[81]
your money back.
[82]
Dick: I can't use it, yeah.
[83]
Eric: Put it in the box with you and you
[84]
get your money back. But
[85]
otherwise yes, the return of principal is
[88]
one of the advantages to a
[89]
variable annuity.
[92]
Dick: What's another advantage to a
[95]
variable annuity?
[95]
Eric: It's really the consideration of
[98]
unlimited upside.
[99]
Dick: Okay.
[99]
Eric: If the market gains 100 points, with
[101]
a variable annuity you have the
[103]
potential to gain 100 points. Now that's
[106]
not a really realistic principal,
[108]
but in exchange for that risk-reward,
[111]
higher risk, higher reward.
[113]
Dick: So normally with any amount of risk
[116]
that we take, we also take a
[117]
corresponding amount-I said that the
[120]
opposite way; but any type of reward
[123]
or gain we're looking for we take a
[125]
corresponding amount of risk; and that
[127]
fits right along with the variable
[128]
annuity.
[128]
Eric: Right, and so when you look at the
[130]
upside, then you look at the
[131]
downside it's the potential to lose all of
[134]
your principal.
[135]
Dick: Right. Now you mentioned you mutual
[137]
funds. How do variable annuities
[139]
compare in fees to mutual funds?
[142]
Eric: Well, they're typically that they
[145]
have that expense ratio. You pay
[148]
your mortality and expenses in a variable
[151]
annuity on top of your investment
[153]
expenses.
[154]
Dick: Yes.
[154]
Eric: Now depending on the insurance
[156]
company and how they have negotiated
[159]
you're usually able to buy into those
[161]
mutual funds, perhaps a lower charge,
[164]
than if you just bought them on the
[165]
street, because you're not having to
[167]
pay that initial share, an A share,
[171]
upfront charge.
[172]
Dick: You're avoiding the load.
[174]
Eric: Right. So you're avoiding the
[177]
expense load right up front. Now
[180]
you're usually paying perhaps maybe closer
[182]
to a C loan, so there are some
[183]
expenses there.
[185]
Dick: In my experience with variable
[186]
annuities are that variable annuities
[189]
do have relatively high fees and they're
[192]
kind of known for that. And so you
[194]
have to get a pretty good investment
[195]
return to overcome a fee of typically--
[199]
my understanding from Morning Star and
[201]
some of these others is that the
[203]
typical mutual fund will have somewhere
[209]
around a 1.25-1.50% fee, and that
[213]
variable annuity, just a normal commercial
[215]
grade variable annuity somewhere
[218]
between 3.0%, maybe on the low side
[220]
depending on how many riders you have,
[221]
to maybe 5.0%.
[223]
Eric: Obviously, when we start adding
[225]
riders in, we're getting into a
[227]
whole new bag of tricks, but typically,
[230]
your base annuity, and this is the
[232]
base chassis you're going to pay at least
[234]
a 1.50% for. There are some
[235]
perhaps, that are a little less, but
[237]
that's just the base.
[238]
Dick: Before you start adding the things
[240]
that people want.
[240]
Eric: Exactly, the things that you really
[242]
buy an annuity for.
[243]
Dick: So if we were to summarize the
[245]
variable annuity and maybe I'll take
[247]
a stab at this. The variable annuity is
[251]
going to give you unlimited upside,
[253]
but you're also going to have a
[255]
corresponding downside or risk. It would
[258]
typically, be better for a younger person
[262]
that has a lot of years ahead of
[263]
them and you'd also have to believe that
[265]
the market is going to do fairly
[267]
well, because you do have a considerable
[269]
amount of fees to overcome. So
[271]
some folks would look at a variable
[274]
annuity and say they would rather be in
[275]
a mutual fund, but in certain situations,
[277]
a variable annuity could be an
[279]
advantage for a younger person. Have I
[281]
been fair, Eric?
[282]
Eric: I'll give you fair.
[283]
Dick: Okay.
[283]
Eric: The variable annuity people may not
[285]
think we were very fair, but I
[286]
think that was a fair assessment.
Most Recent Videos:
You can go back to the homepage right here: Homepage