1 Reply Latest reply on Oct 15, 2010 8:18 PM by ProfessorDJF

    Hybrid Income Plan too good to be true?


      Investigating subject of annuities I came across this video.  It introduces "Hybrid Income Plan" at the end and explains pros and cons of annuities.  Any ideas/opinions/criticizm?  For me it sounds to good to be true.


      Does TIAA-CREF has such product?  If not, a suggestion is to create it.


        • Re: Hybrid Income Plan too good to be true?
          This is a classic example of what insurance companies do to gain new clients - they create a product that is very complex and difficult to analyze because there are so many variables - future inflation, stock market returns, etc. It sounds rosy and appears to take away a lot of the risk, but in return you also give up some of your potential gain. The insurance company has a lot of actuaries and a lot of computers to figure out the issues and options. The consumer seldom has anything close to the analysis power of the insurance companies. The bottom line on all such products is that the complexity has to be paid for and the way it is paid for is in fees and penalties for early withdrawal. Also, there are sales costs for such products - advertising, salespersons, etc. That has to be paid for, again via fees and penalties, which translate into the commissions paid to salespersons. Most of the experts I've paid attention to - people like Suze Orman and Scott Burns (look them up on the web) advise against policies like this because in the end they just cost you more in commissions and fees. If the market goes up you have greater returns but straight investments on your own would likely have paid more. The floors tend to be lower than what you could get yourself with an immediate or fixed annuity. I don't know if TIAA has such a program but in the past I have used my computers (I work with supercomputers) to compare TIAA products with similar products from other companies. TIAA always had lower costs because it has relatively small fees and doesn't pay its salespersons on commission. Even so, I recommend simplicity. For example, term insurance is cheaper than any other kind. It is also the cheapest.