Everyone made some great points here, so forgive me for being argumentative, but I need to confirm my own reasoning.
SARS wrote: ↑Fri Sep 17, 2021 10:06 pm
I think others have already made all the points I would have, so not much to add, except that a 1% fee may seem high but you need to review the whole product (product structures such as guarantees, bonuses, duration, MVAs etc; premiums - eg per benefits paid; charges - including commission and any surrender charges; financial institution strength etc etc) in it's entirety when reviewing any insurance products and trying to determine if they are expensive or not.
These products are notoriously hard to parse. They are right up there with offshore funds in that regard. The fees are often layered.
Right, they are taking on the risk instead of you. You get your contractural annuity rate regardless of what happens to whatever they decide to do with the money (unless that's part of the contract). You're effectively buying a known income - a desirable low-risk asset when you've got a lot to lose.
With fixed annuities, the risk is extremely minor, especially when the underlying investment is in American Treasuries. The plans pass the currency risk onto you, as you have to pay for Yen conversion. At that point, you might as well purchase your own treasuries. Laddering EE bonds is a great option for Americans.
I would argue that the security treasuries offer is perhaps better than trusting in an annuity company.
Finally, one point to clarify, but term life insurance pays out when you die. Annuities are "investment risk insurance" that pay out while you're alive. Completely different products.
Annuities also payout upon early death. That is the aspect that is comparable to term life.
This is why it is often argued that Individual investment + Term life are better options.
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For an American, a ladder of EE bonds (Through treasury.com) + Term life would have
lower risk and high returns than standard fixed annuities.
For Non-American term life + a bond fund would off be comparable. Though notes can be purchased through a broker.
There is an argument for simplicity with annuities, but that comes at a high price. But, so does paying for a financial advisor, which many here would not advocate for.