Variable Annuity Question!!!

[lacawac]

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.

 

[samclem]

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.

 

[heeyy_joe]

Stick with the 401k.

 

[racy]

... 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

 

[Z3Dreamer]

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]

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.

 

[obgyn65]

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.

 

[pb4uski]

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.

 

[Animorph]

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.

 

[timo2]

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.

 

[MikeTN]

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.

 

[nun]

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/about/news/library_articles/gen1210_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.

 

[Lisa99]

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.

 

[FinanceDude]

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.......