Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Variable Annuity Question!!!
Old 04-27-2013, 11:33 PM   #1
Dryer sheet aficionado
 
Join Date: Aug 2011
Posts: 33
Variable Annuity Question!!!

Hey everyone,i,m beginning to feel like the Brett Favre of making a financial decision but I really am having a hard time deciding what to do,I don,t want to make a mistake, so here,s my story and would appreciate feedback. A coulple of weeks ago I met with an advisor who suggested a Met Life Annuity( I posted a thread about it, basicly it was for $500,000.00 ,a 5% quarantee,a survivor option to continue payments and a death payment.)after 5 years I would be able to withdraw 32K a year. Now I visited another planner who suggested a Jackson Variable ,same 500K,after 5 years could withdraw 4.5% a year. No survivor continuation of payments. His theory is that I have the capabilty to convert a life ins policy I have for 250K to continue with locked in premiums of $300 a month never to increase.He feels the Jackson would return higher earnings however the fees for it are 3.33% ($16650.00 yearly) also the fund would have to do better than 8.33% a year for me to see any growth. This seems like a lot of money in fees to me since my target for withdrawls is around 32K a year.I,m wondering if I would be better just leaving my 401K ($950K) in a standard retirement plan(ex Vanguard,New York Life etc.). My calcs I think show me if I could get 3.5% a year, allow for 2% inflation yearly and withdraw $30K a year,it would last for 30 years and still have $650K left.Sorry for the run on explanation but I,m trying to explain as best I can. also I,m 60 years old and retired because of a disabilty,I am also married my wife is 58. Any advice would be appreciated. Thank You. Also since I have the life insurance I could withdraw $36K yearly and still have $233K left,if I got 4% on the money I would have $461K left.
__________________

__________________
lacawac is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 04-28-2013, 12:31 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,615
We exchange ideas her frequently concerning annuities and it's fair to say that most of use are opposed to them. Variable annuities have an especially bad reputation, You've identified the reasons why: Fees. Also, loss of control of your money. You are smart to compare this to a regular investment account you can manage yourself.

You will not get good, impartial advice about these annuities from the people selling them. They are >very< profitable items for these salesman, and as you already know the "features" they offer make them very hard to compare. Just know that the salesman are eager to put you into them because they are can make a lot of money by doing that. You can probably guess where that money comes from--you.

Take your time on this.
__________________

__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is offline   Reply With Quote
Old 04-28-2013, 06:58 AM   #3
Thinks s/he gets paid by the post
heeyy_joe's Avatar
 
Join Date: Nov 2012
Location: Madeira Beach Fl
Posts: 1,403
Stick with the 401k.
__________________
_______________________________________________
"A man is a success if he gets up in the morning and goes to bed at night and in between does what he wants to do" --Bob Dylan.
heeyy_joe is offline   Reply With Quote
Old 04-28-2013, 07:05 AM   #4
Recycles dryer sheets
racy's Avatar
 
Join Date: May 2007
Posts: 478
Quote:
Originally Posted by lacawac View Post
... however the fees for it are 3.33% ... This seems like a lot of money in fees ...
Check out what Bogle says about the "tyranny of compound costs": The Tyranny of Compounding Costs | Above the Market
__________________
The Big Lebowski: Are you employed, sir?
The Dude: Employed?
racy is offline   Reply With Quote
Old 04-28-2013, 07:23 AM   #5
Recycles dryer sheets
 
Join Date: Apr 2013
Location: Beach and Mountain
Posts: 241
Financially, I believe that a variable annuity in your situation, would be bad. VAs are making a comeback in that many financial folks feel they have a place in a retirement portfolio. Those folks must be from a parallel universe to the one I live in. I have listened to their argument and it just doesn't work for me. I do have a variable annuity but here is the situation. In the mid 90's DW and I had maxed out in 401k and IRA. What to do with $15K? Could have done an index fund with low CG payouts. But looked at a low fee VA at Fidelity. There is a certain shielding of assets that are labeled annuity or retirement. Not shielding from litigation but from other disclosures. So we invested in the VA and life is good. Mortality charge was really low.
__________________
Z3Dreamer is offline   Reply With Quote
Old 04-28-2013, 07:27 AM   #6
Recycles dryer sheets
 
Join Date: Apr 2013
Location: Beach and Mountain
Posts: 241
Forgot to add that with a small portion of my portfolio, with a low fee product, it seemed like a reasonable approach. With over 50% of your portfolio? No way. In my case the tax shielding of gains was important. In your case, you are in such a low bracket that I just don't see it.
__________________
Z3Dreamer is offline   Reply With Quote
Old 04-28-2013, 07:51 AM   #7
Thinks s/he gets paid by the post
obgyn65's Avatar
 
Join Date: Sep 2010
Location: midwestern city
Posts: 4,061
I am one of the few here who like annuities, but only deferred ones (if bought at an early age) or SPIAs (when bought age 70+). Variable annuities ? I would say no.
__________________
Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
obgyn65 is offline   Reply With Quote
Old 04-28-2013, 08:18 AM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,410
Quote:
Originally Posted by heeyy_joe View Post
Stick with the 401k.
+1 Let's say you stick with the 401k/IRA and earn 5% on average. In 5 years your $950k would grow to $1,161k and you could take out $68k a year for 30 years (until age 95). YMMV.

With the annuities that you describe you will probably get worse results and pay a boatload of fees to your annuity provider.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is online now   Reply With Quote
Old 04-28-2013, 10:21 PM   #9
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,862
Does Vanguard or Fidelity offer something similar? Shop around if you really want this, as much as we hate it.

How are these "advisors" being paid? You may be hanging around with the wrong people.
__________________
Animorph is offline   Reply With Quote
Old 04-28-2013, 10:50 PM   #10
Thinks s/he gets paid by the post
timo2's Avatar
 
Join Date: Jul 2011
Location: Rio Rancho
Posts: 1,438
Quote:
Originally Posted by lacawac View Post
Hey everyone,i,m beginning to feel like the Brett Favre of making a financial decision..
I'm sorry, but when I hear you are the Brett Favre of finacial something, my immediate impression is you sending unsolicited photos of your portfolio to someone. It took me a second to recall what you really meant

Back on topic, I just had a sales guy try to sell be a variable annuity with the funds I'm going to use to build a CD ladder, even though the two vehicles are for entirely different purposes. Those sales people will say anything. My first experience with this ended up with me getting $2300 in a class action settlement with NE Life for churning life insurance policies.
__________________
"We live the lives we lead because of the thoughts we think" Michael O’Neill
timo2 is offline   Reply With Quote
Try Vanguard
Old 04-29-2013, 10:56 AM   #11
Recycles dryer sheets
 
Join Date: Nov 2011
Location: Oak Ridge
Posts: 52
Try Vanguard

Vanguard offers a variable annuity with reasonable fees. Also, if in doubt why not try a much smaller portion of your portfolio? You can always buy more in a few years when you see how it was doing.
__________________
MikeTN is offline   Reply With Quote
Old 04-29-2013, 12:32 PM   #12
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,835
If you want an annuity it should be to guarantee (well as good as the insurance company's promise anyway) some income. You should think of it as the most conservative part of your fixed income portfolio and I'd use it to give you a base of income along with SS and any DB pension you have. So I would never buy a variable annuity because they vary with the markets and I think that should be kept in other areas of the portfolio, it's exactly what I don't want in an annuity.

Then you have to consider how you buy the annuity, do you want to buy several to make a ladder and see if a CD ladder would be more appropriate.

I'd go to TIAA-CREF and talk to them about their fixed income annuity. You'll get a really bad interest rate right now......but if interest rates go up you'll get additional payments on top of your guaranteed minimum. They are up front about their rates and their fees are lower than most.

https://www.tiaa-cref.org/public/abo...n1210_350.html

FYI I will be annuitizing some of my money with TIAA-CREF as I've been in their deferred annuity for a long time and have a guaranteed minimum of 3%. That sounds ok right now for some of my fixed income.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 04-29-2013, 12:36 PM   #13
Thinks s/he gets paid by the post
Lisa99's Avatar
 
Join Date: Aug 2010
Location: The Villages
Posts: 1,327
We had a Riversource variable annuity with Ameriprise and after three years of losing almost $40,000 in principal we paid $5800 to get out of it.

My skin still crawls when I read the words "variable annuity".

Now someday an SPIA may make sense for us, but we will never buy another variable annuity.
__________________
Lisa99 is offline   Reply With Quote
Old 04-29-2013, 01:56 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,484
Quote:
Originally Posted by lacawac View Post
Hey everyone,i,m beginning to feel like the Brett Favre of making a financial decision but I really am having a hard time deciding what to do,I don,t want to make a mistake, so here,s my story and would appreciate feedback. A coulple of weeks ago I met with an advisor who suggested a Met Life Annuity( I posted a thread about it, basicly it was for $500,000.00 ,a 5% quarantee,a survivor option to continue payments and a death payment.)after 5 years I would be able to withdraw 32K a year. Now I visited another planner who suggested a Jackson Variable ,same 500K,after 5 years could withdraw 4.5% a year. No survivor continuation of payments. His theory is that I have the capabilty to convert a life ins policy I have for 250K to continue with locked in premiums of $300 a month never to increase.He feels the Jackson would return higher earnings however the fees for it are 3.33% ($16650.00 yearly) also the fund would have to do better than 8.33% a year for me to see any growth. This seems like a lot of money in fees to me since my target for withdrawls is around 32K a year.I,m wondering if I would be better just leaving my 401K ($950K) in a standard retirement plan(ex Vanguard,New York Life etc.). My calcs I think show me if I could get 3.5% a year, allow for 2% inflation yearly and withdraw $30K a year,it would last for 30 years and still have $650K left.Sorry for the run on explanation but I,m trying to explain as best I can. also I,m 60 years old and retired because of a disabilty,I am also married my wife is 58. Any advice would be appreciated. Thank You. Also since I have the life insurance I could withdraw $36K yearly and still have $233K left,if I got 4% on the money I would have $461K left.
1)You would come out ahead just keeping it in your 401K and managing the risk through index funds. You are saying you can leave the funds alone for 5 years before you withdraw? If that is the case, you don't need to make a decision for 5 years?

2)It is doubtful that any VA can outperform another. While it is true Jackson has more aggressive options, MetLife is a stronger company and their VAs have better options at death than Jackson. They both are high cost, though.

These are 2 things off the top of my head.......
__________________

__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 02:30 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.