Anybody know anything about Amerus Life Annuities?

[laurence]

I think the annuity my friend is being pushed into buying is called MultiChoice Annuity Income Series: IncomePlus. The documentation is IMPOSSIBLE to read. I explained to him that all my warning alarms are going off with the literature, and he's ready to back off, but I need to point him to some specifics. The thing is, he really can't stand dealing with investments, so if an annuity (as much as I don't like them) is not a terrible one, I'm inclined to let him get into it, because he is so averse to doing any DD or research. He's 39 and just came into a large inheritence ( ~200k or therabouts).

 

[brewer12345]

Tell him to run away from this product as fast as he can. This is a sleazy equity indexed annuity that is massively overpriced and includes a 10 year surrender charge.

If he doesn't want to deal with it right now, tell him to open up a VG account and dump it all into a muni MMF. It'll still be there later. Almost anything is better than the piece of crap he is being accosted with.

 

[laurence]

Yeah, I told him the same, but wanted to confirm. I pointed out the 10 year surrender charge and the amorphous "Market Value Adjustment" if he withdraws the money early. Thanks Brewer.

The guy was following up with "Now let's talk about Universal Life..."

 

[cute fuzzy bunny]

The documentation is IMPOSSIBLE to read.

Welcome to my world.

He's 39 and just came into a large inheritence ( ~200k or therabouts).

Suggest he take the 'risk tolerance' test at fidelity or vanguard and buy the lifecycle or strategy fund that suits his risk tolerance, and forget about it.

http://news.morningstar.com/classroom2/course.asp?docId=4514&page=3&CN=COM

The short version is "do you want some insurance company leeches to drain off your money a little bit each year in return for almost no benefit, or keep that for yourself with almost no effort involved?"

 

[ERD50]

, because he is so averse to doing any DD or research.

It takes almost zero DD to determine a reasonable (not perfect) asset allocation. Then put the money into low-cost, no up-front or back-end fee mutual index funds.

XX% in Total Stock market fund. Maybe some International exposure - I generally don't even worry about this, as the US market does so much international business.

XX% in some bond index funds.


You can get more specific asset allocation advice by searching the forum, but it does not really need to get much more complex than that, IMO. Maybe some real estate stuff, CDs, but, in the long run, I'm not sure it matters much.

First, your friend should review his networth. Any 'bad debt' - credit card balance? Probably the best investment would be to pay those off, and learn to not run up bad debt. Keep some emergency funds (3-4 months)

As brewer says, put in a MM fund until you are comfortable with a plan. Keep it simple and you won't get scared into a bad hard-to-recover-from decision.

-ERD50

 

[laurence]

I was going to steer him to a Vanguard Target Retirement Fund, any thoughts/comments on that?

 

[brewer12345]

I was going to steer him to a Vanguard Target Retirement Fund, any thoughts/comments on that?

I'd probably go with something like VBALX, VWELX or Wellesley. But that is just personal preference. A Target fund would be fine, t oo.

 

[cute fuzzy bunny]

I was going to steer him to a Vanguard Target Retirement Fund, any thoughts/comments on that?

Beats the hell out of the other option, with one arm tied behind its back, one leg gimpy, and a massive head wound.

Brewers other suggestions are good too.

If he's just being swayed by marketing crap, tell him that vwelx is "the oldest and one of the most successful mutual funds in the united states and its where all the 'old money' people have put their wealth since the early 1900s".

 

[wabmester]

I explained to him that all my warning alarms are going off with the literature

Forget all that. Do the numbers make sense?

 

[laurence]

I mentioned VWELX and Wellesley as well as I have VWELX as part of my portfolio. It's going to be messy, they have the paperwork half filled out at home. This guy is creating their trust and will probably cause them some pain when they back out. Messy, messy. I've coached him already on some broken record talking points.

 

[laurence]

Forget all that. Do the numbers make sense?

The guy tells him, "it makes about ten percent" and then gave him an excel spreadsheet with generic multiplyers on it. What a schmuck!

 

[brewer12345]

Equity indexed annuities are almost unintelligible for the layman, which means the pusher agent can pretty much just make **** up and its impossible to tell what is real. But it always sounds good...

 

[ats5g]

fyi, the SEC and NASD put out investor alerts on Equity Indexed Annuities:

from SEC Equity-Indexed Annuities

from NASD Equity-Indexed Annuities-A Complex Choice

btw, you could counter the hard sales pitch of the broker [who get a commission], but offering a case of beer.

- Alec

 

[laurence]

My only concern is putting him in something like Wellesly with dividends and then incurring tax obligations yearly. Stooopid question time, since this is a lump sum, can we put him in a Viper and just leave it alone? Looking to simplify as much as possible.

 

[brewer12345]

My only concern is putting him in something like Wellesly with dividends and then incurring tax obligations yearly. Stooopid question time, since this is a lump sum, can we put him in a Viper and just leave it alone? Looking to simplify as much as possible.

Umm, so you are saying you think he wouldn't want to get a quarterly check from his investment? Figure out how many cases of decent beer last year's divs would have bought him; could be a big selling point.

Barring that, I am pretty sure that VG has a tax managed balanced fund.

 

[laurence]

Well, he wants this money for his retirement. Just growth, no income for now. He's taking ( a far too large portion IMHO) for spending now.

 

[cute fuzzy bunny]

They have a variety of tax managed funds. Returns can be a little lower than some other options, the fees are a little higher, and some of them require that you dont withdraw for 5 years after investment.

 

[FinanceDude]

I mentioned VWELX and Wellesley as well as I have VWELX as part of my portfolio. It's going to be messy, they have the paperwork half filled out at home. This guy is creating their trust and will probably cause them some pain when they back out. Messy, messy. I've coached him already on some broken record talking points.

It's not too late..........even if they signed it, they have a 10-day free look provision so they can cancel...............

 

[Coach]

I was going to steer him to a Vanguard Target Retirement Fund, any thoughts/comments on that?

That's a great idea, Laurence. Tell him the fund does all the managing and all he has to do is not mess around with it.

Coach

 

[mickeyd]

MultiChoice Annuity Income Series: IncomePlus.

A most impressive name for this annuity. It must be good because it has all of those financial-like words. Is it possible for me to invest a couple of my stashed millions in this investment opportunity? Ahhh, never mind I'll just leave my stash in that one word place-Vanguard.

 

[ats5g]

Laurence,

One problem with the balanced funds/Target Retirement funds in taxable accounts is that they are constantly rebalancing, realizing LT and ST gains.

Plus, if your friend is in a higher tax bracket, the balanced funds/Target Retirement funds use fully taxable bonds [except Vanguard TM Balanced].

You might explore filling up his tax deferred accounts [401(k), Roth] with bonds first, and using the money in the taxable for tax efficient equities [ETF's, VTSMX, etc]. IMO, taking all his retirement accounts into consideration for asset class placement would be better than having a mix to stocks and bonds in each account.

- Alec

 

[laurence]

And that's definitely the goal. My thought was an ETF, and perhaps even convincing him to max his retirement accounts (401k and IRA) and use the inheritance to suppliment, thereby effectively transferring the money into tax deffered accounts.