Word: amex
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...million flight insurance at $13 a ticket works out to about a dime in expected payouts for every dollar in premiums, leaving Amex 90 cents to cover expenses and profit. The Statue of Liberty stood to gain a penny every time you charged an $80 dinner or a $400 airline ticket to your card, leaving Amex 319 pennies in the case of the dinner (at its service charge of about 4% for restaurants) or 999 pennies in the case of the ticket (at its 2 1/2% or so on airline fares). The premium you paid for the platinum card, which...
Annuities are like nondeductible IRAs, only without the $2,000 annual limit. With this one, Amex was offering to charge my card anywhere from $50 to $3,000 a month, at my option, and to pay me interest on my monthly contributions at a 12% "introductory rate" through June of next year. Thereafter the rate would be "set above a nationally recognized interest index plus 1.5%." I was all set to sign up, when I noticed...
...come-on is trivial over the long pull; it is designed to cloud your judgment. The true rate on this deal is the "nationally recognized interest index plus 1.5%" that Amex talks about. But a footnote reveals this to be an index of short-term, tax-free bonds, the lowest-yielding animals...
...Once in, you can stop making new contributions -- but it's expensive to get old ones out. So don't think you'll just pocket that 12% for a year and then move on to something else. If you withdraw your money, Amex charges a penalty, 7% the first year, which gradually evaporates in seven years. But there's also the 10% IRS penalty on withdrawals before age 59 1/2 and, whatever your age, the income tax due on the interest your funds have earned...
...Amex shows how $200 a month for 25 years would grow to $183,000, assuming 12% the first year and 8% each subsequent year, vs. just $124,000 outside the shelter of a tax-deferred annuity. But that's $183,000 before tax vs. $124,000 after tax. And it assumes that the best you could earn on your own is a fully taxable 8% a year...