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Old 03-14-2012, 08:53 AM   #21
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We had dinner with my late wife's uncle and his daughter both of whom work for an insurance company that sells annuities. There is now always a period of time that they feel they must talk about how great their company is and how they like going to work every day to help people who need financial investment advice. Annuities always come up.
Yeah those corporate types do have a great life, no stress of pressuring people to buy, no complaints, etc. It is one of the cushiest jobs around. I have met plenty of people who are like that too. It's like they live in a parallel universe. I know a guy from Allianz who is convinced that EIAs are the greatest financial product known to man.........
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Old 03-14-2012, 08:56 AM   #22
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I know a guy from Allianz who is convinced that EIAs are the greatest financial product known to man.........
If someone tried to sell me an EIA saying this stuff -- assuming I wanted to toy with him/her and not just cast them away -- I'd ask them to show me their personal financial statements so I can see they have most of their portfolio in EIAs. If they are so great, I would expect them to be almost "all in" for them. If they're not, you know they are just blowing hot air.
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Old 03-14-2012, 09:05 AM   #23
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If someone tried to sell me an EIA saying this stuff -- assuming I wanted to toy with him/her and not just cast them away -- I'd ask them to show me their personal financial statements so I can see they have most of their portfolio in EIAs. If they are so great, I would expect them to be almost "all in" for them. If they're not, you know they are just blowing hot air.
They have a profit sharing plan, and the amount Allianz kicks in for the employees is directly related to growth in the annuity product.......

I have been an advisor for almost 15 years, and have yet to justify an EIA for ANYBODY, although I did disrupt a few sales for others under the "free look" period..........
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Old 03-14-2012, 09:10 AM   #24
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They have a profit sharing plan, and the amount Allianz kicks in for the employees is directly related to growth in the annuity product.......
Rule #1: Never do business with ANY financial planner or investment product salesperson unless their economic interests in your business are aligned with the growth of your portfolio.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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Old 03-14-2012, 01:34 PM   #25
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Wow, you folks are all so good...not much to add that has not been said. I agree that one needs to see the overall portfolio and life situation to see where this fits, although all my research has shown that the only annuity I would consider is a SPIA.

I may have missed this question from someone, but a fair question for any agent is to explain EXACTLY how they are paid. Edward Jones, to their credit, has posted somewhere online (I read it once, don't have it now) every single way their advisors make money...so that the customer can understand where there may be conflicts.

It's good of you to advise him...just remember that somtimes even friends and family will go against your advice, and there's not much you can do to stop them once you've said your piece.
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Old 03-14-2012, 03:04 PM   #26
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Rule #1: Never do business with ANY financial planner or investment product salesperson unless their economic interests in your business are aligned with the growth of your portfolio.
And even this can be a problem. A salesperson/advisor who is compensated based on the growth of the portfolio has a built-in interest in recommending high beta products. If the portfolio zooms up, the advisor does very well. If it plummets in value, he loses nothing, but the client can lose his whole stash.
Better to compensate the advisor based on the value of the portfolio. Better still to pay them for their time and expertise. Best yet: Do it yourself, getting assistance when you run short of knowledge.
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Old 03-14-2012, 03:09 PM   #27
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Better to compensate the advisor based on the value of the portfolio. Better still to pay them for their time and expertise. Best yet: Do it yourself, getting assistance when you run short of knowledge.
Maybe I wasn't clear. When I said growth what I meant *was* the change in value of the portfolio (including negative growth meaning less compensation for the advisor). In most cases, a fee-only basis is better still, but even one that takes a certain cut of portfolio value only gets paid more when you are worth more. That is miles ahead of someone who gets paid commissions to churn products which may or may not be good ones, and may or may not be appropriate for your circumstances.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
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Old 03-14-2012, 03:27 PM   #28
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A little too late, but this scott burns article seems to address just your question

A Roth IRA Is a Good Thing. Don
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Old 03-14-2012, 11:35 PM   #29
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My friend was here earlier tonight and spoke briefly about his decision not to buy into any annuities. His broker, the one I am not too crazy about, ahd also advised him not to buy any annuities (perhaps because his firm has his Roth IRA). My friend was concerned what to tell the Pruidenial agent if he asked why he was not going to buy. I told my friend he did not have to give a reason and to cut the guy off if he persisted. He doesn't owe the agent any explanation.

My friend did not bring any of the literature the agent gave him because he already knew he wasn't buying anything and did not need to spend any time showing it to me (which was all fine with me LOL!).

Another thanks to all of you who replied and helped out with the successful "intervention."
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Old 03-15-2012, 09:16 AM   #30
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That is miles ahead of someone who gets paid commissions to churn products which may or may not be good ones, and may or may not be appropriate for your circumstances.
Yes, I agree 100%

The basics of saving/investing/money management should definitely be taught in school. It's been much more useful to me than the trig identities and diagramming sentences.
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Old 03-15-2012, 10:37 AM   #31
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My friend was here earlier tonight and spoke briefly about his decision not to buy into any annuities. His broker, the one I am not too crazy about, ahd also advised him not to buy any annuities (perhaps because his firm has his Roth IRA). My friend was concerned what to tell the Pruidenial agent if he asked why he was not going to buy. I told my friend he did not have to give a reason and to cut the guy off if he persisted. He doesn't owe the agent any explanation.

My friend did not bring any of the literature the agent gave him because he already knew he wasn't buying anything and did not need to spend any time showing it to me (which was all fine with me LOL!).

Another thanks to all of you who replied and helped out with the successful "intervention."
You did well by your friend, he/she owes you lunch...
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Old 03-15-2012, 09:00 PM   #32
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Knowing the game

This topic feeds into a bigger picture of "knowing the game". Example: local Toyota dealership opens in a new location in town, complete with fancy new large bays for the cars to drive thru with 25ft plus ceilings and clearly very expensive location/facility costs. Wife takes the Sequoia in for electric window repair and low and behold, the sweet lady comes out with a list of things we really need to get repaired (about 12 items, including brakes, over 5 grand total). I thought we were going to burst out laughing as she went thru this diatribe of b.s. Bottom line, no one cares about your money but you, NO ONE. And no, we didn't help pay for the shiny new Toyota dealership that day. Once you train yourself to recognize the game, then it gets easier to keep your money. I don't give anyone selling anything the time of day (annuities, extended warranty, Amway scammers, donation to save Eskimos for Jesus, etc.). Good move for your friend to say no to the Annuity salesman, key word here is "salesman".
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Old 09-18-2012, 11:15 PM   #33
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Reviving this old thread I started 6 months ago.

This same friend of mine tragically lost his mother in a car accident last month (his dad died 3 years ago). His parents were rather wealthy so he and his sister will be splitting an estate worth about $1M, not including the house which will fetch him at least another $200k.

He doesn't plan to stop working although he probably could, or at least reduce his hours worked. He has been asking me for advice as to how to invest this huge windfall. Among the ideas I have been floating are:

(1) Contribute more to his Roth IRA. He will turn 50 next year so he will be able to boost his contributions there. His wage income is in the low 50s so he is below the $58k limit for deductions.

(2) He just bought his apartment last December so he plans to pay off the mortgage which is about $100k now.

(3) He could contribute more to his 457(b) plan (he is a local government employee).

(4) He has some individual stock holdings with a broker/friend of his. If he invests into additional funds outside of the broker, I have been suggesting various investment such as a stock index fund and muni bond funds (he nearly emptied a muni bond fund to make the down payment on his apartment). The problem with both funds is that they have pretty high NAVs these days with the markets up.

With the election in a few months, I have also thrown out there to him the idea of putting his money into low-risk investments such as CDs or money markets until early next year so we can see what the dopes in Washington do.

He has so big of a windfall that he can do all of the above. Paying off his mortgage will lessen his monthly expenses and enable him to put more away into available tax-deferred accounts to keep his tax bill down.

This might be a better question for Bogleheads but I thought I'd try you folks first. Thank you in advance for your ideas.
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Old 09-19-2012, 04:55 AM   #34
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Giving advice seems like a good idea. I'd be comfortable steering a friend to Vanguard, for instance. But I'd draw the line there. I wouldn't want to take credit or blame for what follows.
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Old 09-19-2012, 07:31 AM   #35
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The real question is, how much do you like this friend ?
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Old 09-19-2012, 07:48 AM   #36
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Reviving this old thread I started 6 months ago.


(1) Contribute more to his Roth IRA. He will turn 50 next year so he will be able to boost his contributions there. His wage income is in the low 50s so he is below the $58k limit for deductions.

(2) He just bought his apartment last December so he plans to pay off the mortgage which is about $100k now.

(3) He could contribute more to his 457(b) plan (he is a local government employee).

(4) He has some individual stock holdings with a broker/friend of his. If he invests into additional funds outside of the broker, I have been suggesting various investment such as a stock index fund and muni bond funds (he nearly emptied a muni bond fund to make the down payment on his apartment). The problem with both funds is that they have pretty high NAVs these days with the markets up.

With the election in a few months, I have also thrown out there to him the idea of putting his money into low-risk investments such as CDs or money markets until early next year so we can see what the dopes in Washington do.

This might be a better question for Bogleheads but I thought I'd try you folks first. Thank you in advance for your ideas.

If I was advising a good friend under these circumstances, I would take the very low risk approach:

1) Pay off apartment if he is planning on staying there a while, not everyone will agree here, but a very low risk move IMHO.
2) Be sure to put the max available into the ROTH, as each year you don't, you don't get back
3) Put the rest in low/no risk investment (No penalty CD or the like) at least until after the election and maybe longer.
4) Begin to dollar cost average amounts he is comfortable with each month/quarter after the election (or again, maybe later)

I always liked the idea to wait about a year after an event like this before making any big decisions, it gives you time to get your head straight. The above is, IMHO again, very low risk and should be in the best interest of your friend (or at least, shouldn't go horribly wrong). By the way, I am not versed in the 457b plan, so please include that as well if it falls into the very low risk spectrum or is a use it or lose it kinda thing (401k/IRA/ROTH, etc).

Give your friend my condolences, I've been where he is, and it is difficult.

Regards,

Pan
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Old 09-19-2012, 09:23 AM   #37
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You are on the right track with your advice. He should max out his 457b, fully fund his Roth, and then invest any additional monies in taxable accounts. In all cases in low cost, index funds with bonds in the 457b, and stocks in other accounts to minimize taxes.

Once he has decided his ultimate AA he could put it in some on-line savings accounts (staying under the FDIC limit in each case) and then value average into investments over a couple years. If he chooses that course, then it would probably make sense ot pay off the mortgage.
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Old 09-19-2012, 09:59 AM   #38
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Paying off his mortgage will lessen his monthly expenses and enable him to put more away into available tax-deferred accounts to keep his tax bill down.
That particular line sounds like pretzel logic to me. Take $100,000 (that probably has no taxable gain associated with it if it was inherited) to pay off a mortgage so that he can invest more in tax-deferred accounts? Seems like a round-a-bout way of robbing Peter to pay Paul, with no apparent advantage. Why not just use some of the $100,000 to cover expenses if he needs cash flow to max out tax deferred options? Then the majority of the $100,000 is still available in case the liquidity is needed.

Paying off the mortgage might be reasonable, I just don't think the above reason is a valid one.

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Old 09-19-2012, 10:31 AM   #39
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Reviving this old thread I started 6 months ago.

This same friend of mine tragically lost his mother in a car accident last month (his dad died 3 years ago). His parents were rather wealthy so he and his sister will be splitting an estate worth about $1M, not including the house which will fetch him at least another $200k.

He doesn't plan to stop working although he probably could, or at least reduce his hours worked. He has been asking me for advice as to how to invest this huge windfall. Among the ideas I have been floating are:

(1) Contribute more to his Roth IRA. He will turn 50 next year so he will be able to boost his contributions there. His wage income is in the low 50s so he is below the $58k limit for deductions.

(2) He just bought his apartment last December so he plans to pay off the mortgage which is about $100k now.

(3) He could contribute more to his 457(b) plan (he is a local government employee).

(4) He has some individual stock holdings with a broker/friend of his. If he invests into additional funds outside of the broker, I have been suggesting various investment such as a stock index fund and muni bond funds (he nearly emptied a muni bond fund to make the down payment on his apartment). The problem with both funds is that they have pretty high NAVs these days with the markets up.

With the election in a few months, I have also thrown out there to him the idea of putting his money into low-risk investments such as CDs or money markets until early next year so we can see what the dopes in Washington do.

He has so big of a windfall that he can do all of the above. Paying off his mortgage will lessen his monthly expenses and enable him to put more away into available tax-deferred accounts to keep his tax bill down.

This might be a better question for Bogleheads but I thought I'd try you folks first. Thank you in advance for your ideas.
A call to Vanguard or Fidelity would be a good start, they'd offer some free advice if you friend was thinking about opening a $600k account.

Your advice sounds pretty good to me.

Paying off the mortgage with $100k is a debatable thing, some love the idea some don't like to tie up the capital, but I wouldn't analyse that decision too much. If you friend feels good about doing it then it's a good thing to do. If he wants to invest the money and keep paying the mortgage than that's the way to go.

I'd put a years worth of expenses in cash/MM/or short term bonds. The I'd put the rest is some broad index funds. If you need income the tax exempt munis would be good for some of this after tax money.

If he will keep working I'd definitely max out his tax deferred investment opportunities.

So I basically think your advice is spot on
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Old 09-19-2012, 10:53 AM   #40
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I

By the way, I am not versed in the 457b plan, so please include that as well if it falls into the very low risk spectrum or is a use it or lose it kinda thing (401k/IRA/ROTH, etc).

Give your friend my condolences, I've been where he is, and it is difficult.

Regards,

Pan
+1 on the sadness of your friend's situation and that it's best to wait a while before making big financial decisions.

FYI the 457 is a great retirement plan......it's actually a deferred compensation, non-qualified retirement plan. That means that it grows tax deferred until you take money out of it. The best part is that you can do that when you leave the job, there is no 10% penalty for withdrawal before 59.5. Most plans will offer a range of investments just like a 401k plan. You don't use a W-4P to set withholding from income from it because it's defined as compensation, there's a 20% mandatory withholding tax on any income.
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