ChemEng wrote:
Traditional Fixed Annuities and Fixed Indexed Annuities ARE NOT INVESTMENTS. They are safe money savings instruments much like a bank CD in that respect. To compare money saved in a fixed annuity with money invested in stocks and mutual funds is apples and oranges.The obvious negative feature for fixed annuities (and any other annuity for that matter) is reduced value for years that markets exceed the fixed return rate.
Allow me to re-write your statement to make my point and let's see if anyone would ever write or compare or say the following:
The obvious negative feature for bank CDs (and any other CD for that matter) is reduced value for years that markets exceed the fixed return rate.
The obvious negative feature for Treasury Bonds (and any other bond for that matter) is reduced value for years that markets exceed the fixed return rate.
The obvious negative feature for bank savings accounts (and any other savings for that matter) is reduced value for years that markets exceed the fixed return rate.
Get my point?
By the way, you didn't point out the "other" negative feature in a fixed annuity (aside from the Surrender Charge schedule), you simply compared a SAFE money savings instrument to at risk investment money.
There is ZERO costs in a FIXED ANNUITY.Another negative is the increased cost for the product when compared to other similar products (VPGFX, VPGDX, and VPDFX for example) that are MUCH cheaper.
In dollars and cents that would be written $0.00.
What has been confused here are costs in VARIABLE ANNUITIES (about 3% per year) with FIXED annuities (0% per year) then compared the non-comparables with mutual funds or stocks.
A Variable Annuity is a bloated pig with lip stick SOLD by the Series 7 Registered Representative crowd who HAD to obtain an insurance license to be able to sell that product. They are the classic day traders playing stocks like a flea market swap meet....with your money.
It is imperative that one understands that point.
Insurance agents DO NOT sell Variable Annuities because they violate they fundamental aspect of "Safety of Principal" inherent in ALL annuities EXCEPT VARIABLE annuities.
Now, what's the "other" negative feature in a fixed annuity setting aside the surrender charge schedule?
Perhaps, before you answer, you may want to read THIS thread titled A Reporter's Guide to Fixed Annuities
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