Brent D. Gardner, ChFC wrote:

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Can you not tell me what happened in the past, 1988 to 1992?

"Arnie Goetchius" <arnie.goetchius[at]att.net> wrote in message
news:G2Qnd.41737$7i4.27452[at]bgtnsc05-news.ops.worldnet.att.net...
- quote -

If we could predict the future, do you think we'd tell you for free? =)

Nobody knows what interest rates will be in the future, much less what
mortality and expenses will be, and how product innovations will change the
annuity landscape.

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/

Si vis pacem para bellum!

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

- quote -

I am not asking any company to provide an annuity based on a 7% Interest
Rate when today's interest rate is only 4.85%

- quote -

I am definitely not asking a carrier to commit to 7% for the balance of
my life when today's rate is much lower. What I'm trying to find out is
what the carriers would commit to if interest rates were substantially
higher then they are today.

- quote -

I am not asking about "Most Immediate Annuities available today". I am
asking about what annuities might be available in the future and what
Guaranteed Interest rate would be if the long term interest rate at that
time was 7%. For example, Long term interest rates (30 Year Treasury
Note)in 1988-1992 were around 8%. What kind of guaranteed interest rates
were being offered by the carriers at that time?

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I too understand your basic question, but you seem to overlook the fact that
YOU are utilizing a 7% Interest Rate. There are not too many companies
around today that would be willing to offer such a contract.

In the event that you were to anuitize in 2007 at age 65, you are asking a carrier
to committ to 7% for the balance of your life............................
Most Immediate Annuities available today, offer a much LOWER Guarranteed
Interest rate, along with a possible additional "Current Interest Rate", which
only applies to the then "current year".
Cal Lester CLU

beliavsky[at]aol.com wrote:

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Okay, that makes sense. The OP said that the impact would be such that
instead of 954, it would more likely 654 + 200 = $854. This would
represent an 30% increase in the monthly payment, not the 44% implied by
the interest rate increase alone.

The implied formula appears to be for age 65, multiply the change in
interest rate by 70% and apply the result to what the calculator says
for today's long term interest rate.

I don't need a great deal of precison here. I'm basically trying to get
a rough estimate of what an immediate annuity would pay based on
$100,000 single pay premium in the year 2007 at age 65 and a long term
interest rate of 7% at that time. About $850 seems to be the answer.


======================================= MODERATOR'S COMMENT:
Please trim the post to which you are responding.

Arnie Goetchius <arnie.goetchius[at]att.net> wrote in message news:<cNpnd.936000$Gx4.807757[at]bgtnsc04-news.ops.worldnet.att.net> ...
- quote -

The monthly payments on NEW annuity policies that you would receive on
a lump sum would rise if interest rates rose, but LESS than
proportionally. This is because the payments an annuitant receives
effectively come from
(1) return of capital
(2) investment income

and component (1) depends largely on the longevity tables.

Suppose interest rates were zero. There could still exist immediate
annuities with positive payouts on a lump sum, because people don't
live forever.

The lower the life expectancy of the prospective annuitant, the less
sensitive annuity payments are to interest rates, on a proportional
basis.

Arnie Goetchius <arnie.goetchius[at]att.net> wrote:
- quote -

The annuity consumes capital each year, so a 2% higher interest would
add about $200 per month.

--
Ron

"Arnie Goetchius" <arnie.goetchius[at]att.net> wrote in message
news:cNpnd.936000$Gx4.807757[at]bgtnsc04-news.ops.worldnet.att.net...
- quote -

Every company's quotes will be based on their expected mortality, expected
expenses, and expected return (often current).

There are immediate variable annuities where the payments can increase (or
decrease) as the markets fluctuate over time.

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/

Si vis pacem para bellum!

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

A calculator is a calculator, NOTHING more. What ever numbers are put into it,
will produce the desired result. G.I.G.O.

If your question is will my INCOME go up IF the interest rates go up, then
the answer to that riddle would only be found IN the contract. In most cases,
the answer would be NO. The income that you would normally receive is
based upon "projections" made by the actuarial staff. They normally would
take into consideration fluctuations in rates in their calculations.

Cal Lester CLU


Arnie Goetchius wrote:
- quote -

Tad Borek wrote:

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That's what I'm interested in - newly issued contracts.

But not for an existing fixed annuity,
- quote -

Right. Understood.

- quote -

Thanks for responding.

Arnie Goetchius wrote:
- quote -

Arnie,
You've essentially reverse-engineered an immediate (fixed) annuity.
Nothing magic to it really...an IA is secured with fixed income
investments purchased by the company issuing the contract. So you'll see
a correlation between the effective rate of the annuity and the current
interest rates.

Should interest rates rise then the payout would rise for newly-issued
contracts (and vice versa). But not for an existing fixed annuity,
that's why they're called "fixed" annuities.

-Tad

If I go to an immediate annuity calculator such as the one at

http://www.totalreturnannuities.com/

and enter

age 65
gender male
single premium 100,000

I get a result that says $654 monthly income.

I assume that the calculator is using the current rate of about 4.85%
for long term interest rates in part of its calculation.

If in the future, the long term interest went up to, for example 7%, can
I assume that the calculator's result would increase by a similar
amount, ie. 44% and the monthly payment would show about $942 instead of
$654?

Or am I missing something?