Retire and sell my business

[Monterey298sc]

In 21 days I will sell the real estate for 1.8 M . I have a IRA for 2M and my Broker wants me to put the 1.8 M in a annuity. No annual fees, just credit for my total. I know there is a huge commission. School me on annuities please ?

 

[pb4uski]

You really need to find out what type of annuity is it. What do you mean by "just credit for my total"?

I'm guessing that it is a MYGA which has many similarities to a CD but is issued by an insurer rather than a bank... but to put $1.8m into a MYGA with a single insurer would be foolish since most states only insure annuities to $300k or so (it varies).

Given that rate are increasing, I think it best at this point to stay liquid... perhaps stick with 3 or 6-month US Treasuries in a brokerage account. And later on deploy tht money into a US Treasury or CD ladder.

If you have other investments, what are they invested in?

 

[Stormy Kromer]

I was sold the annuity route....big mistake.

Go to Vanguard and figure out what you need this money for. NO to the annuity. No matter what.

The rest of the posters might not be as kind. In their defense, avoid annuities. I've been there. Big mistake....

 

[OldShooter]

Your broker doesn't have your best interests in mind; he has his paycheck in mind. Find a new broker.

 

[38Chevy454]

I know there is a huge commission.

Bingo, pass Go and collect $200.

The old saying "Just say no" applies to annuities in my opinion.

 

[FI_RElater]

NO


Just NO. NO to any annuity

the salesman wants to help plan for HIS retirement... not yours!

(clear enough?)

 

[DrRoy]

Annuities make money for others. Say no.

 

[Dtail]

If you need to reallocate some monies to the fixed income portion of your AA, then potentially putting some of the monies into a deferred annuity such as a MYGA could be a possibility.
As an aside the brokers fee would be already built into the MYGA. Putting it another way, if you get a MYGA for New York Life as one example off the Blueprint Income site, or through the Fidelity broker, the rates are the same.

 

[arcyallen]

Before you immediately believe an investment is always "bad" or "good", think about the value it's providing. Annuities categorically aren't any more "bad" than any other insurance policy. But you want to make sure you're getting the value out of it, and while I think there are some good annuities out there there are plenty of terrible ones.

I'm a big fan of investing the money and having it grow while accepting the volatility. If you hate volatility, or are willing to pay to guarantee that your money give you a certain income stream in the future, annuities are worth considering. The one guideline I'd use is "The more complicated it is, the worse it probably is for you. And the better it is for the broker."

 

[jazz4cash]

I think its very unlikely that a broker is suggesting a MYGA.

What is the name of the annuity?
Who is the issuer?
What problem are you trying to solve?

 

[Another Reader]

There are very few annuities that are in the best interest of the buyer. What company is your broker with? If it's Edward Jones or someone similar, recognize they have been milking your account as long as you have been a customer. Read up on the company.

If a guaranteed stream of income over and above your future Social Security is critical to your retirement, then Vanguard or Fidelity would be the places to shop for an annuity. Otherwise, you should consider reading up here and elsewhere on the 4 percent rule. Firecalc, which many people here use, can be helpful in sorting this out.

If you don't educate yourself about retirement finances and familiarize yourself with investing, you are likely to be taken to the cleaners by a broker that has his or her interests in mind when selling you products. If you can run a successful business, you can do this as well.

 

[OldShooter]

@Monterey298sc, to amplify on my post #4: It is critically important that your "broker" be a fiduciary who is legally required to act in your best interests at all times. "Broker" has no legal meaning and many who call themselves "brokers" or "registered representatives" are not fiduciaries.

Here is an SEC paper on the subject, probably more than you wanted to know: https://www.sec.gov/rules/interp/2019/ia-5248.pdf and a salient quotation:

"Under its duty of loyalty, an investment adviser must eliminate or make full and fair disclosure of all conflicts of interest which might incline an investment adviser— consciously or unconsciously—to render advice which is not disinterested such that a client can provide informed consent to the conflict. We believe this is another part of an investment adviser’s obligation to act in the best interest of its client."
​

So ... if the "broker" is not disclosing his conflict of interest in selling this annuity, then he is not fulfilling the duties of a fiduciary, indicating that he may not even be one.

Ditch him or her; you do not want to do business with someone who can legally rob you.

 

[Exchme]

You have an annuity coming to you already that will cover a significant fraction of your spending - Social Security. With $3.8M, you don't need to buy another one, especially considering that SS is inflation protected and private annuities are not fully protected.

I agree with the folks above that your "broker" seems to be self serving. A thought on Oldshooter's point about whether your broker is a fiduciary. If you ask and get any answer other than 100% "Yes", then it's really 100% "No". What's usual is that they give you a mealy-mouthed scripted answer full of bafflegab that has been tested for customer acceptance so they can continue the long con of extracting your cash and putting it in their wallet.

A financial planner that works by the hour (instead of one that takes a percentage of assets under management) might do you a lot of good. They could help you set goals (live it up?, charity?, legacy to heirs?), discuss your risk tolerance and make a plan to meet your goals. Minimally, they would help you set an asset allocation that meets your willingness, need and ability to take risk, they would recommend low cost, highly diversified ETFs like Vanguard Total Market and Total Bond (or equivalent at Fidelity or Schwab), and make a Roth Conversion plan for you - with a $2+M IRA, you need to think about taxes.

 

[jazz4cash]

Crickets

 

[arcyallen]

If it's Edward Jones or someone similar, recognize they have been milking your account as long as you have been a customer.

I worked as an advisor for Edward Jones for six years. While churning seems to be rampant in the industry, I can tell you I rarely saw it there. The firm was VERY diligent about making sure it didn't happen. I'd get occasional calls from our home office on trades I'd made asking for an explanation to make sure it -wasn't- happening. They even made an occasional phone call directly with the customer to make sure everything was right if a trade looked funny. My friend (who also worked there) and I both reflect, ten years later, on the fact that they're so customer focused.

Like annuities, there are good versions and poor versions of everything.

 

[levindb]

Although the question asked was related to annuities, please consider the tax implication of the $1.8 million sale...a significant portion of those funds may have to go to your Uncle in D.C. Depending on where the property is located, that state may also ask for a share of your sale price.

If it all goes into an annuity, then it may be locked in for a few years (up to 10?) and then where will the funds for the taxes due come from?

Tax planning is very important...I would encourage slow moving at this point until all of the taxes have been planned for, and then wait a little longer before making any long term commitments...while you are waiting, you may want to look for a new broker.

 

[pb4uski]

Great point. If the OPs broker hasn't considered or asked about taxes, move on to someone else

 

[Monterey298sc]

I am well aware of a estimate of the taxes owed in 2023. I do
Appreciate all of the advice.

 

[pb4uski]

A 5 year US Treasury ladder might be a better play than an annuity.

 

[Koolau]

You lost me at "broker."

Not advice, but suggestion: DCA your 1.8 mil into your current asset allocation. If you want to hold some "cash" MYGAs are possibly a suitable substitution for CDs. Strongly suggest against most other annuities but YMMV.