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Old 09-26-2011, 09:05 AM   #1
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Hi

New to the forum. I joined because I have a situation I need to find a new solution for. Both myself and my wife are 50. She still works and makes about 35k a year and pays for our health insurance [the main reason she works] I have ER at least for now in the past year banking some 1.3M in mostly CDs about 80k in stocks IRA accounts.

Our home is paid for and I moved to KS to be close to family but hate the state. We lived in Michigan most of our lives with a 7 year stint in Florida in the 80s during the last recession. We also just before moving to KS lived in a home I built in Hot Springs Arkansas for 2 years. My type of work did not and does not have HC available and my physical situation would not allow me to do it as before.

It was bull work in the construction industry and although I was self employed and made very good money its not something I can continue to do. I have been living nicely off of my interest. I put most of my CDs away for 5 years at 5%. This runs out in April of this spring and I do not see many CDs paying more than 2.5%. This would cut my income from about 50k a year in which I have been saving money up and adding to my CDs to barley paying the bills.

I think at 2.5% I could be OK but it would not be fun and games with food and other things increasing in price. At that time we would rely on more of my wifes income to support the basic bills with my interest income than we have been. I know that this is not a bad situation compared to many in the US in this economy.

My plan was to keep putting money away from the interest that I did not spend and then when my wife retired and we draw SS it would be a inflation hedge to offset the cost of things.

We own our home and its paid for and want to also move. Back to Hot Springs or Florida. I think with her education and experience in the banking industry she could find a job [even entry level] to bring in some money and pay for HC insurance. With me bringing in even 25k a year I think it would be OK. We have two cars both paid for and one Motorcycle paid for so other than about 29k each on our student loans we are free and clear.

I have looked into stocks and invest about 5k of my insurance income into my IRA each year as a write off. She takes full advantage of her Employer based co investment. I do not have the stomach to watch wild swings in the market, this is why I did CDs in the first place. I like the annuities that Chase has shown me but I can not draw on them for 9 and a half years. I could use my own money to pay myself and then let the annuitie build.

I would like to have any advice on this situation that anyone would offer. Thanks in advance.
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Old 09-26-2011, 09:22 AM   #2
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Quote:
Originally Posted by edteach View Post
I like the annuities that Chase has shown me but I can not draw on them for 9 and a half years. I could use my own money to pay myself and then let the annuitie build.
This one sentence causes alarm bells to ring. I'm not sure what type of annuity Chase has shown you but you need to be very, very cautious of what you will actually get for your money vs. what you are being sold you will get for your money. Sounds like it might be a variable annuity, a product known to frequently benefit the seller far more than the buyer.

Read the fine print very carefully and make sure you understand everything contained in the annuity contract. Educate yourself on the pluses and many potential minuses of variable annuities. Here's some reading to help you get started: Avoiding abusive variable-annuity sales practices - Robert Powell - MarketWatch
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Old 09-26-2011, 09:26 AM   #3
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Welcome, please tell us what you like about the Chase Annuities? Have you taken the time to read the 60 to 100 pages of disclosures?
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Old 09-26-2011, 09:59 AM   #4
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Be very, very careful when working with annuities. There is much to say on the topic, but in general they are chock full of fees and penalties so that you start at a disadvantage from the get-go.

CD interest will not be good for the next 2 years, so you will have to resign yourself to them, making up for the lower income through your wife's earnings and maybe part time work. I would be very cautious about reaching for yield at this time, the stock and bond markets are very unsettled and seem to lurch from crisis to crisis like a drunken sailor.

If your choices are overwhelming, just leave things as they are until you have time to thoroughly digest the information, then act. After all, you are retired, and you have the time to analyze and compare.
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Old 09-26-2011, 10:26 AM   #5
Confused about dryer sheets
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Thanks for the replies. I did not read the fine print on the Chase annuities. I was told that it worked like this. I put in say 100k. I am guaranteed 6% on the 100k the first year, if the market value goes up to say 150k on the anniversary of my first year than the next year I am guaranteed 6% of 150k from then on unless it goes higher on the anniversary date then I am staked in at that level. If say on the first anniversary date it goes down to say 75k then I get 6% of 100k the second year. I can never go down below 100k and can only go up and be staked in for life at that level as long as I do not remove the principal. After 59 1/5 I can remove the interest without penalty. This is fixed at this for life and if I decide to remove the principal I get either the 100k in invested if the market is below what I invested or the current value of the account. It sounded good to me but I admit I know little to nothing about these investments. I thought the big draw back was I could not draw without penalty until 59 and a half.

The other option is to do what ever I can get for a 10 year CD, do the best I can maybe move to a place that is cheaper to live like back to HS or Fla. [its not cost effective to live in KS] and then if rates go up in a couple of years take the hit of 6 months or 1 year and reinvest at the higher rate. I live a very economical life style. But taxes and almost everything in KS is BS high. Its not cheap to live in Wichita KS. Full tax on food, my car plate is 350 a year and its an 09 corolla, My home is valued at about 159k and I pay 4k a year in tax and 360 in HOAs. My wife makes about 15 an hour to help offset the extra expense and HC. In HS I paid 898 a year on a 190k home, and my plates were 25 a year. We paid only half the sales tax on food and in Fla, its no sales tax on food and no state income tax. KS is not a good place to live for taxes and on top of that its the ugliest or close to it state in the UNION. Our new motto is Kansas at least were not Iowa. Not trying to offend anyone, JMHO. Thanks for the input.
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Old 09-26-2011, 10:39 AM   #6
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Quote:
Originally Posted by edteach View Post
Thanks for the replies. I did not read the fine print on the Chase annuities. I was told that it worked like this....
You understand the Chase representative salesperson gets a commission for selling this product, right? And that salespeople will often say whatever they think it takes to get you to buy the product, may be brainwashed by the company about how the product works, and not understand the fine print themselves?

Buyer be afraid beware...

Quote:
Originally Posted by edteach View Post
The other option is to do what ever I can get for a 10 year CD...
At least this provides certainty, has fewer potential unknown pitfalls, and gives the option to cash out early if interest rates improve.
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Old 09-26-2011, 11:10 AM   #7
Confused about dryer sheets
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Wahoo, this is how I tend to lean, your last advice. I do not have the stomach for ups and downs. I feel much more comfortable knowing I am getting a return of X than hope I get Y. I defied all the nay sayers who said I was not getting on the band wagon of 10 to 20 percent return on the SM in the 90s. I said I was very happy with my 5% return because I knew I was getting X. I had a friend in the carpet business that had about 500k invested in the tech sector. He was told by his broker when the bubble burst [and still has not recovered] to keep it in, it will go back up. He was down to 225k in 99 last time I talked to him. If he had been in a simple CD he could have gotten a nice strait return of 5 percent and been up 80% on simple interest as of today. I am sure he is not up that much on the value of tech stocks. I do put in up to 5k a year in my IRA and use it as a write off, but I may have to stop that as I will not need the write off at 2%. I have about 270k in one bank that I let capitalize. I do not draw that interest to live on. So I can as they mature draw the 2% on all the funds available and for a couple of years just not capitalize anything. I guess in these times to keep your principal and live off the interest and at least not go back wards is doing well. LOL
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