TTRoberts
December 26th 03, 08:49 PM
"Paul E" , you wrote:
<< <I>Its a Hartford variable annuity, called the Hartford Director Variable
Annuity. Here are the key provisions:
1) Gives me a guaranteed 7% of the principle per year, paid monthly
2) Principle is invested in mutual funds from the Hartford group, of my
choosing, so as the market grows, so will the principle.
3) There is a Principle Protection feature, so I cannot lose the principle
due to market conditions, etc.
Thats it in a nutshell... <b>7% of the principle paid as income</b>, principle
protection guarantee, plus market growth of principle.
It sounded like a dream come true, and because there is nowhere else I can
obtain <b>7% guaranteed on my money</b> payable monthly, and because it is
combined
with principle growth, and protection is the ace in the hole, this sounds
like a dream program.</I> >>
Being guaranteed 7% "on your money" is very different from receiving 7% "of the
principle" that'll be paid as income.
<< <I>So I think Im going to do it. I have the prospectuses here, and can find
Nothing to dissuade me.
finally, they draw up an example, based on a $200,000 principle invested in
one of these VA contracts 10 years ago. If I had done that, it shows that
for the years 1994 through 1998, I would have received $14,000 per year
income. And from the years 1999 to 2003, the 'step up' provision would
have paid me $33,000 for each of those years. And, at the end of the 10th
year, my principle would be worth $521,000, up from $200,000!!!!!! If this
doesnt sound like a pie in the sky scenario, I dont know what does! And
yet over the 10 yrs the S&P index has gained about 10.5%, meaning that this
was a very 'normal' 10 yr period, and therefore, these types of gains are
not at all out of the ordinary of what should be expected from any 'avg' 10
yr period.
So, if there is something 'wrong' in this analysis, or something I havent
appeard to have thought of, Id be very interested to hear it. Because Im
very close to going ahead with it.. It sounds That Good! </I> >>
I feel you need to take some time to better understand how a sequence of
variable returns on an investment affects a cash flow from that investment. I
would suggest that the returns for the time period they have cut out for their
example exaggerates on the high side just what you might really expect from
today forward. This is because the period from 1994 through 1998-1999 was an
usually good period for the S&P Index (an unprecedented 5 consecutive high
double digit returns) and the period following was pretty poor . . .which
generates that "10.5%" AVERAGE your suggesting. But if you were to reverse the
sequence of returns given the same cash flow, you'll find that you'd wind up
with a "principle" less than with the original sequence - even though the
average return of 10.5% would still be the same.
With $33,000 coming out each of the last 5 years, the numbers do not seem
correct (particularly the final balance). But, all in all, I don't really see
anything particularly "wrong" or "bad" with this approach. I do also feel that
these particular numbers are not reflective of what you might expect over the
next 10 years . . . .even if the average return were to still be at 10.5%.
.. . . . just be careful about putting all your eggs in one basket.
<< <I>Its a Hartford variable annuity, called the Hartford Director Variable
Annuity. Here are the key provisions:
1) Gives me a guaranteed 7% of the principle per year, paid monthly
2) Principle is invested in mutual funds from the Hartford group, of my
choosing, so as the market grows, so will the principle.
3) There is a Principle Protection feature, so I cannot lose the principle
due to market conditions, etc.
Thats it in a nutshell... <b>7% of the principle paid as income</b>, principle
protection guarantee, plus market growth of principle.
It sounded like a dream come true, and because there is nowhere else I can
obtain <b>7% guaranteed on my money</b> payable monthly, and because it is
combined
with principle growth, and protection is the ace in the hole, this sounds
like a dream program.</I> >>
Being guaranteed 7% "on your money" is very different from receiving 7% "of the
principle" that'll be paid as income.
<< <I>So I think Im going to do it. I have the prospectuses here, and can find
Nothing to dissuade me.
finally, they draw up an example, based on a $200,000 principle invested in
one of these VA contracts 10 years ago. If I had done that, it shows that
for the years 1994 through 1998, I would have received $14,000 per year
income. And from the years 1999 to 2003, the 'step up' provision would
have paid me $33,000 for each of those years. And, at the end of the 10th
year, my principle would be worth $521,000, up from $200,000!!!!!! If this
doesnt sound like a pie in the sky scenario, I dont know what does! And
yet over the 10 yrs the S&P index has gained about 10.5%, meaning that this
was a very 'normal' 10 yr period, and therefore, these types of gains are
not at all out of the ordinary of what should be expected from any 'avg' 10
yr period.
So, if there is something 'wrong' in this analysis, or something I havent
appeard to have thought of, Id be very interested to hear it. Because Im
very close to going ahead with it.. It sounds That Good! </I> >>
I feel you need to take some time to better understand how a sequence of
variable returns on an investment affects a cash flow from that investment. I
would suggest that the returns for the time period they have cut out for their
example exaggerates on the high side just what you might really expect from
today forward. This is because the period from 1994 through 1998-1999 was an
usually good period for the S&P Index (an unprecedented 5 consecutive high
double digit returns) and the period following was pretty poor . . .which
generates that "10.5%" AVERAGE your suggesting. But if you were to reverse the
sequence of returns given the same cash flow, you'll find that you'd wind up
with a "principle" less than with the original sequence - even though the
average return of 10.5% would still be the same.
With $33,000 coming out each of the last 5 years, the numbers do not seem
correct (particularly the final balance). But, all in all, I don't really see
anything particularly "wrong" or "bad" with this approach. I do also feel that
these particular numbers are not reflective of what you might expect over the
next 10 years . . . .even if the average return were to still be at 10.5%.
.. . . . just be careful about putting all your eggs in one basket.