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I am thinking of buying an annuity. I am worried about the following words on the contract. Is it the standard way of an annuity? If something goes wrong, will I lose ALL my money? I am in the USA. Disclaimer

Athene Agility [GEN (09/15) NB, IR (06/18), EIBR (06/18)] or state variations are issued by Athene Annuity and Life Company, West Des Moines, IA. Product features, limitations and availability vary; see the Certificate of Disclosure for details. Products not available in all states.

This annuity contains features, exclusions, and limitations that vary by state. For a full explanation of this annuity, please refer to the Certificate of Disclosure for a more detailed explanation of the annuity, including definition of terms that are capitalized in this insert, and contact your insurance professional or the company for costs and complete details.

ATHENE AGILITY IS A PRODUCT OF THE INSURANCE INDUSTRY AND NOT GUARANTEED BY ANY BANK NOR INSURED BY FDIC OR NCUA/NCUSIP. MAY LOSE VALUE. NO BACK/CREDIT UNION GUARANTEE. NOT A DEPOSIT. NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY. MAY ONLY BE OFFERED BY A LICENSED INSURANCE AGENT.

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    Annuities are generally insurance products, they are the insurance.
    – littleadv
    Commented Mar 20, 2023 at 17:35
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    Variable annuities are also generally scams - ways to let you invest in the stock market except they loot most of your profits with hidden fees and loads. If you must have an annuity, get a simple annuity and a brokerage account, and buy a low-expense-ratio index fund. Commented Mar 21, 2023 at 19:11
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    Those disclaimers are typical for all financial products from financial institutions (particularly deposit insurance insured financial institutions) for product which are not insured by deposit insurance. If you give money to a financial institution and it goes under, you can lose it in every case except in the narrow "insured by FDIC/etc" case. Credit Suisse stiffed one class of bond holders by US$17B over the weekend.
    – Flydog57
    Commented Mar 23, 2023 at 0:25

4 Answers 4

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An annuity is basically an insurance policy in reverse. Either way, they are betting that they can make a decent statistical projection of your future and adjust what you pay them against what they pay you so that in the end they make a profit more often than they take a loss.

In a life insurance policy, you pay them a bit at a time and they hope the lump sum they pay out at the end is less than the sum of your payments plus any profits they made by investing the money.

In an annuity, you pay them a lump sum up front and they hope that it plus the profits from investing it is greater than the sum of the payments they give you.

The reason a customer might want a life insurance policy is that they guarantee they will make one large payment when you die, even if you die earlier than they projected and they take a loss by doing so.

The reason a customer might want an annuity is that they guarantee that they will continue making those payments on a regular basis even if you outlive their projections and they take a loss by doing so... Or if their own investments drop in value so they aren't getting the income from them that they expected. In fact that's exactly why one might consider putting some money into an annuity; it may not be the best income stream, but it is a guaranteed income stream.

The guarantee you have in the annuity is the terms of the annuity itself; it is as trustworthy, or not, as the terms of a life insurance policy. Either way, you are buying a product and trusting that the company will be able to fulfill the contract, which means you need to shop by trustworthiness as well as returns.

Admittedly the up-front purchase of the annuity means you don't get to shop around every year to see if anyone will make you a better offer, as you can with insurance. And the returns may not be as good as those you'd get from investing the money yourself and drawing it down over time, as balance against the chance that in the worst cases they're likely to be better.

Shop carefully, consider all your options, remember that it doesn't have to be an all-or-nothing decision, make your best guess and don't look back.

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    Since an annuity is an insurance product, shouldn't it be backstopped by State Guarranty Funds? This site claims that most states offer coverage up to $250,000: annuity.org/annuities/regulations/state-guaranty-associations However, since the site is called "annuity.org", maybe we should take it with a grain of salt.
    – Nobody
    Commented Mar 21, 2023 at 7:36
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    One thing annuities and some times of life insurance have in common that is different from normal insurance is that there is a significant amount of value stored in the policy. Particularly in the case of annuities it's quite common for the majority of a person's retirement savings to be tied up in one, so it's quite reasonable for someone to be asking about what happens if the provider goes broke. Commented Mar 22, 2023 at 18:19
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    This answer doesn't seem to address the fundamental question, which is: should I be worried that my annuity is not insured by the FDIC or other agency? What happens if the insurer goes out of business?
    – Chris
    Commented Mar 22, 2023 at 20:46
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    This shouldn't be the top answer. It doesn't tell how to determine if the insurance company's state provides insurance on your annuity. And it doesn't tell you how to check AM Best to determine the insurer's credit rating, which will go a long way towards determining whether you should be concerned. Commented Mar 22, 2023 at 21:50
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    Feel free to write an answer you like better and see if folks prefer it. Not every answer is, or has to be, exhaustive.
    – keshlam
    Commented Mar 22, 2023 at 23:08
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“Annuity” is used for a number of different types of insurance products. I’ve come to my own conclusion that the only annuity that’s worth considering is an immediate annuity, where you trade a lump sum of money for a stream of income until you die.

Other flavors of annuities serve one purpose, to fund the lifestyle of the salesman selling them. Some annuities have terms that are so harmful to the buyer, they should not be legal to sell.

Your question lacks the details we need to properly comment on the product you are considering.

In my opinion, insurance has a time and place, as does investing. The two are separate and should be kept so.

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You are trying to compare annuities with investment products. But they are different.

With an investment product you give some of your money to a bank (or similar organization) and they give you it back later, plus some extra for interest or growth. There is a small risk that the bank will go out of business and can't pay you. There are national organizations that exist to guarantee that if your bank goes out of business then you and other customers get their money back - with some restrictions. In the US this is the Federal Deposit Insurance Corporation (FDIC). It's called "Insurance" because it insures again bank failure, not because it protects insurance policies.

Annuities are not investments, they are insurance products. Nobody holds your money - there is just a contract that you pay them some money up front and they pay you a regular sum over a period. Because they are insurance and not investments they are not covered by the FDIC like banks. This is what the disclaimer you quote is telling you. The FDIC does not protect you. But insurance companies are covered by an entirely different scheme to pay customers in the event they go out of business. In the US it is done at the state level and you can read about it here.. You are still protected, though you should read up about the details.

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    NCUA is basically the 'FDIC for Credit Unions' in case anyone is wondering (I think ncua == 'national credit union association' but I'm not going to look it up). Commented Mar 21, 2023 at 21:21
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Three most probable ways of losing your money on an annuity are:

  1. You die (particularly meaning sooner than expected).
  2. Your counterparty turns belly up (this is what they mean by "not insured").
  3. Your country sports a (hyper-)inflation (this is what they mean by "may lose value").

How probable is any of the above is anyone's guess.

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  • Right - but after seeing several banks actually go belly up, and what could have happened to all the money in accounts in excess of 250k... #2 is clearly what the OP is worried about, and it seems a legitimate worry.
    – neminem
    Commented Mar 22, 2023 at 22:23
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    Of course it's a legitimate worry. That's why annuities aren't the right answer for everyone, and why you need to decide how much returns and trust trade off against each other. Insurance ditto. It's ALL trade-offs. And it isn't an all-or-nothing decision; you can mix annuities and other long-term financial planning tools in whatever percentages you feel suit your needs. Personally I feel inflation is a bigger risk to annuities than the company failing is, assuming you have bought the annuity from a reputable and stable company, but others may disagree.
    – keshlam
    Commented Mar 23, 2023 at 4:30

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