confused200 said:ING offers a rider to its variable annuity. The rider offers a guaranteed 7%/yr. increase for up to 10 years (I'll call it the Guaranty Value "GV") -- the guaranty ends when I starts withdrawal (if sooner than 10 years). If the contract value ("CV") exceeds the GV, then the GV = CV. After 10 yrs or start of withdrawals whichever is earlier, the 7% guaranty ends; and the GV will never decrease, but will increase to the CV, if the CV exceeds the GV.

Furthermore, there is a quarterly lock-in -- i.e. if the CV increases by more than 7% at the end of any quarter, the GV = that quarter's CV. [This applies through the life of contract.]That can't be right. You mean that the GV will increase to match the CV if it is higher, right? So the CV has to have cumulatively outperformed the guaranty, not just had a better quarter.

If the CV loses 20% in one quarter, then gains 15% in the second, the GV is just going up by the 7%, not the 15%, right?

This is a potentially attractive product, depending on your needs, but there are lots of things that need to be considered, and, usually, lots of hidden ways you're paying for the attractive guaranties. For example, this may be a slam dunk if you have lots of freedom in picking the investments, but the guaranty is a lot less meaningful if you're restricted to conservative investments. I'd love to be able to put all of my money into, say, a technology fund with a 7% guaranty.

062703 said:7% - 2.25% = 4.75%. Buy a CD. Also Correct me if I'm wrong but if your max WD rate is 6% at 76 then odds are you'll end before the contract does.
The 7% is the min. increase in the GV for the 1st 10 yrs, assuming I don't start withdrawing during that 10 yrs. The death benefit is the CV.

LH2004 said:confused200 said:ING offers a rider to its variable annuity. The rider offers a guaranteed 7%/yr. increase for up to 10 years (I'll call it the Guaranty Value "GV") -- the guaranty ends when I starts withdrawal (if sooner than 10 years). If the contract value ("CV") exceeds the GV, then the GV = CV. After 10 yrs or start of withdrawals whichever is earlier, the 7% guaranty ends; and the GV will never decrease, but will increase to the CV, if the CV exceeds the GV.

Furthermore, there is a quarterly lock-in -- i.e. if the CV increases by more than 7% at the end of any quarter, the GV = that quarter's CV. [This applies through the life of contract.]That can't be right. You mean that the GV will increase to match the CV if it is higher, right? So the CV has to have cumulatively outperformed the guaranty, not just had a better quarter.

If the CV loses 20% in one quarter, then gains 15% in the second, the GV is just going up by the 7%, not the 15%, right?

This is a potentially attractive product, depending on your needs, but there are lots of things that need to be considered, and, usually, lots of hidden ways you're paying for the attractive guaranties. For example, this may be a slam dunk if you have lots of freedom in picking the investments, but the guaranty is a lot less meaningful if you're restricted to conservative investments. I'd love to be able to put all of my money into, say, a technology fund with a 7% guaranty.
You are right that if the CV loses 20% in Q1, then gains 15% in Q2, the GV goes up by only 7%. But if the CV gains 15% (net after pro-rata expenses) in Q1, then loses 10% and stays there (or go further down) for the rest of year, then GV goes up by 15% (assuming this is the first yr so that the CV=GV at the start). After the 1st yr, in order for the GV to go up by more than 7% in any year, the CV must exceed the GV at some quarter-end -- i.e. the CV must grow at an avg of 9.25% pa. before the CV will pass the GV to give you an increase greater than 7%/yr. So if you technology fund goes down for the 1st 3 years, you have a lot of catching up to do before the CV will pass the GV. My hesitation is that an avg of 9.25% pa is a high hurdle to pass.

The investment options include, among others, ING Global Technology, ING Global Resources, ING Marsico Growth, ING Legg Mason Partners Aggressive Growth, ING JPMorgan Emerging Markets Equity, ING Baron Small Cap Growth, ING American Funds Growth, ING Franklin Mutual Shares, etc. Their offerings include 1-3 value/blend/growth funds from Davis, Franklin Resources, Fidelity, Janus, Templeton, T. Rowe Price, Van Kampen, BlackRock, etc. -- totalling about 40 large cap funds, 8 mid caps funds, and 4 small caps. ING requires 20% invested in one of the two specified short/intermediate bond fund; the other 80% in your choice of the funds offered above.

Given the add'l info, do you still think this is worth buying? If yes, why?

If you assume that your investment choises do not do well and you end up with 7% p.a. and double your money after 10 years and nothing more (worst case scenario), is it still worth buying?

confused200 said:...After the 1st yr, in order for the GV to go up by more than 7% in any year, the CV must exceed the GV at some quarter-end -- i.e. the CV must grow at an avg of 9.25% pa. before the CV will pass the GV to give you an increase greater than 7%/yr. So if you technology fund goes down for the 1st 3 years, you have a lot of catching up to do before the CV will pass the GV. My hesitation is that an avg of 9.25% pa is a high hurdle to pass.

The investment options include, among others, ING Global Technology, ING Global Resources, ING Marsico Growth, ING Legg Mason Partners Aggressive Growth, ING JPMorgan Emerging Markets Equity, ING Baron Small Cap Growth, ING American Funds Growth, ING Franklin Mutual Shares, etc. Their offerings include 1-3 value/blend/growth funds from Davis, Franklin Resources, Fidelity, Janus, Templeton, T. Rowe Price, Van Kampen, BlackRock, etc. -- totalling about 40 large cap funds, 8 mid caps funds, and 4 small caps. ING requires 20% invested in one of the two specified short/intermediate bond fund; the other 80% in your choice of the funds offered above.

Given the add'l info, do you still think this is worth buying? If yes, why?

If you assume that your investment choices do not do well and you end up with 7% p.a. and double your money after 10 years and nothing more (worst case scenario), is it still worth buying?I would see it as: you are buying an annuity which will pay out about 9.8% of your initial investment (5% of (1+7%)^10), starting in 10 years, plus a call option on the cash value outperforming the guaranty by 25% (since you only get to invest 80% of the cash value in something that has much chance of it). That call option has some real value if you invest the money in a very volatile asset, which is what you want to do, but then you need to realize that there's a strong chance that you are stuck with the guaranty and nothing more.

So I think it's a decent substitute for just a fixed deferred life annuity, if you want that. I would not let any time go by between the end of the 7% guaranty and the start of the 5% guaranty, since then your guarantied return is basically zero, so I wouldn't buy before 10 years before the time I wanted to start spending this money. I also would not want to take anything out early, or to violate the withdrawal cap to keep the lifetime guaranty, so I would be sure not to invest too much of my money this way.

confused200 said:The annuity is being sold by an ING subsidiary; and it states that the subsidiary is solely responsible for the policy. I have never heard of that subsidiary (but I haven't bought any annuities). The subsidiary is rated A+, one rung below the top rating. Is that something I should be concerned about?Every annuity is going to be just one company's responsibility.

With a variable annuity, your money in the variable investment options is not at risk: if the insurance company fails, your money is in separate accounts and protected from the company's ordinary creditors. The guaranty (which, of course, is the reason you're considering this particular annuity) is one of those ordinary obligations; in general, as a policyholder, you would be ahead of non-policy creditors, and there is usually some type of state guaranty fund that will pay off the obligation if the insurance company can't, up to some amount (around $100,000 or more).

So it's not nearly as big a problem with a variable annuity as it is with a fixed annuity (including an equity indexed annuity, where your money is NOT set aside in a separate account as with a variable annuity). It is still something to think about, but it's not a huge problem when you have a high-rated company like that.

EricGo07 said:Fund management fees ?

Probably part of the actual returns of the funds so collected prior to calculation of CV.

Aside from the option to essentially go for super-risky high-return investments with a safety net, how would it compare to say investing for 10-yrs in a broadly diversified EFT, then getting a fixed life annuity.

Those generally pay 6-6.5% of money invested. But then you're talking about a larger lumpsum after investing it for 10 years. So is it just a 1-1.5% premium for guarantee to have your investment at least do 7% annually for 10 years, the 2.25%/yr fees and max 80% investment in stock funds (I'm assuming on top of regular mutual fund expense ratios which become significant usually in risky funds) making practically sure that you won't do much better than that.

So the decision would be 9.8% guarantee after 10 years vs. (6% of (1+X)^10) in fixed annuity after 10 years. With X say the annualized % return of a broad index EFT, you get 9.8% pay out if X = 5%. that doesn't sound too hard to outperform over 10 years. Am I missing something except potential increase in CV during withdrawal period?

Obviously it depends on how good you think the market is gonna do. The policy basically gambles that all in all you cannot beat annualized returns of 5% over the next 10-yrs if invested elsewhere.

In the plan, you'd have to be pretty lucky to get more than 9.25% remembering that 9.25% will be mix of 20% short term bonds (say B%) and 80% of other investments. Effectively those other investments have to return [9.25-(Bx0.2)]/0.8 to best the 9.25%. At B = 4%, other investments would have to exceed 10.6% to have the whole portoflio beat the 9.25% rate.

Aside from the lucky good quarters in the beginning scenario (requires good market timing), chances of outperforming 10.6% after expenses of funds over 10 years are not a gimme. Besides, if you like your chances of returning more than 10.6% annualized over 10 years, beating 5% returns should be pretty easy. So it's between your risk tolerance and your confidence that you can get higher returns than 5% over 10 years. EVeryone's answer is personal at this point but for me, I'd take my chances outside of the variable annuity based on last 10 year returns.

What are the min benefits on death? Whatever the GV is at that time? Some lumpsum based on CV?