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Where to go with an existing Variable Annuity?
Old 11-28-2007, 05:12 PM   #1
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Where to go with an existing Variable Annuity?

Hello, my GF and I are thinking of finding a new home for her variable annuity. It's currently a Lincoln American Legacy annuity, my understanding is that the subaccounts are backed by American Funds. She understands now that it wasn't the best place to put her money, but it is what it is. Its current value is around 170k, and she's outside the surrender charge period.

In my view we have 3 options:
1- Keep it where it is (big downside is the 1.25% M&E)
2- 1035 it to Fidelity (large selection of subaccounts)
3- 1035 it to Vanguard (smaller selection of subaccounts, better indexy choices)

While we try to figure out what to do as far as a custodian, we're also trying to figure out a better asset allocation. It's presently (big groan) 70% "Growth", 15% "Growth-Income" and 15% "International". Her only other assets are a Roth (about 22k), and a house (about 150k).

She's 53, and plans to retire/semi-retire at 60 when she can begin getting survivor benefits from SS. No draw will be required from the annuity or the Roth, as long as I'm still in the picture, and I likely wont be FIREd until she's about 67-68.

I'm looking for advice in two areas...

Has anyone here moved a VA to Fidelity or Vanguard? Which would you choose?

Any thoughts on asset allocation? I'm leaning toward approx 66 stock, 33 fixed; with the stock being split around 60/40 US/Intl, and splitting some of the US to small/med cap. I think that can be accomplished with Vanguard's VA subaccounts, but their fixed choices don't include any TIPS-like funds, which I'd like for part of the fixed.

I appreciate any suggestions! I'm trying to approach this with a "leave the campsite better than you found it" attitude; in the event we ever separate, I'd like her to have a good plan going forward.

Michael
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Old 11-29-2007, 06:49 AM   #2
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Quote:
Where to go with an existing Variable Annuity?
Hello, my GF and I are thinking of finding a new home for her variable annuity. It's currently a Lincoln American Legacy annuity... but it is what it is... and she's outside the surrender charge period.

In my view we have 3 options:
1- Keep it where it is (big downside is the 1.25% M&E)
2- 1035 it to Fidelity (large selection of subaccounts)
3- 1035 it to Vanguard (smaller selection of subaccounts, better indexy choices)


I'm looking for advice in two areas...

Has anyone here moved a VA to Fidelity or Vanguard? Which would you choose?
mja

DW had a similar non-qualified VA that we recently moved over to Vanguard - Vanguard is our choice since virtually all our investments are there already. I printed out the 1035 forms from the website, filled them out, and then called VG for a final review. Amazingly, the transfer took less than two weeks from start to having all funds in Vanguard VAs. I'm sure that Fidelity has similar accounts and would be an excellent choice as well.

Quote:
While we try to figure out what to do as far as a custodian, we're also trying to figure out a better asset allocation. It's presently (big groan) 70% "Growth", 15% "Growth-Income" and 15% "International". Her only other assets are a Roth (about 22k), and a house (about 150k)...

Any thoughts on asset allocation? I'm leaning toward approx 66 stock, 33 fixed; with the stock being split around 60/40 US/Intl, and splitting some of the US to small/med cap. I think that can be accomplished with Vanguard's VA subaccounts, but their fixed choices don't include any TIPS-like funds, which I'd like for part of the fixed.

I appreciate any suggestions! I'm trying to approach this with a "leave the campsite better than you found it" attitude; in the event we ever separate, I'd like her to have a good plan going forward.

Michael
Personally, if you do not see a need to use the funds in her VA or Roth in the next 10 years or so, why search out TIPS and other fixed assets for these accounts? IMO, the past 5 years in the market have been great for Value and International. I see "Growth" catching up in the next few years. Also, with the dollar dropping compared to other currencies, the International funds will have a built-in currency exchange advantage.

JohnP
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Old 11-29-2007, 08:16 AM   #3
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Either Vanguard or Fido would be a fine choice, so do whichever one you like. On the topic of allocation, I would not get too fancy. If your girlfriend is not a financial sophisticate, pick a good balanced fund at either company, dump it all in and forget about it.
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Old 11-29-2007, 09:23 AM   #4
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Quote:
Originally Posted by mja View Post
Hello, my GF and I are thinking of finding a new home for her variable annuity. It's currently a Lincoln American Legacy annuity, my understanding is that the subaccounts are backed by American Funds.
A clarification: VA subaccounts aren't "backed" by anyone, they use American Funds as their investment manager for that particular subaccount.

Quote:
In my view we have 3 options:
1- Keep it where it is (big downside is the 1.25% M&E)
2- 1035 it to Fidelity (large selection of subaccounts)
3- 1035 it to Vanguard (smaller selection of subaccounts, better indexy choices)
Actually, your total expense is M&E, plus the fund expenses of the subaccounts.

Quote:
I appreciate any suggestions! I'm trying to approach this with a "leave the campsite better than you found it" attitude; in the event we ever separate, I'd like her to have a good plan going forward.
Michael
Nothing wrong with Fido or Vanguard. I like Fido beter because they do more of a managed approach, rather than strict indexing, but it's personal choice there.

You need to keep it in the VA, if you liquidate, she will have taxes and penalties to pay.............

Vanguard or Fido or even TIAA-Cref will be lower cost. FWIW, Lincoln Benefit is not a terrible company, but their costs are quite a bit higher than Vanguard or Fido because they pay their reps to sell the VA product...........
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