Date: Tue, 24 Oct 2006 15:02:18 -0500
From: joetaxpayer 
Subject: Re: annuities question(s)
Newsgroups: misc.invest.financial-plan
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Ed wrote:

> On another board there was a lot posted about annuities. I posted a link to
> a site that pointed out some  of
> the pro's and con's.
> http://registeredrep.com/annuities_ins/finance_pros_cons_annuities/
> 
> I got a reply from Elle (a regular poster here):
> "The piece linked is dated 2002. Because of the tax law changes of 2003, for
> one, many of its arguments are invalid."
> 
> I replied:
> " Which of its arguments are invalid?"
> 
> Elle replied:
> "Just about any that refer to tax law, like I wrote above."
> 

The one thing that strikes me from the site is with regard to a fixed 
annuity;
"Norman Chiodras, founder of Retirement Planners Inc. in Oakbrook, Ill., 
occasionally uses fixed annuities for clients as an alternative to CDs. 
“They often pay a premium over CDs, and they're safer than bonds because 
their value doesn't fluctuate,” he says."

First, if they do not pay a premium over CDs, then what would be the 
point? I advocate immediate annuities as I see 8% for a 60 year old vs 
the 5.xx% CDs out there.

It may be nit-picking, but his remark about 'safer' is absurd. The 
annuity gives the same annual return year after year, as would a bond. 
The trade off with the annuity is to have no return of the face value in 
return for a higher annual payout. The bond would have given out a known 
value at maturity. I can say that the payment stream from the annuity 
does fluctuate in value as inflation chips away. (Mostly down as we 
haven't seen disinflation in some time)

JOE