Playing Fido

[LarryMelman]

Quote:

Originally Posted by doneat54 Got this quote tonight from the FIDO rep for an annuity: Monthly Income Payment: $5,900.00 Annuity Source of Funds: Traditional IRA Annuity Option: Period Certain Annuity Purchase Payment: $478,201.47 Cost Basis: $0.00 Taxable Amount: $5,900.00 Payment Frequency: Monthly Period Certain: 7 Years Total of Payments $495,600.00* So if I am reading this right, I get $495,600.00 in total payments ($5900x84 months) for $478,201.47. So a net gain of $17,398 over 7 years (?). According to Moneychimp's CAGR calculator, that is a 0.51% CAGR. Its from MassMutual BTW, looks like they rate pretty high. Ok, some growth, and immunity from market crashes, yes. But the loss of flexibility I'll have bugs me a bit. And thanks for all the insights above, very helpful.

I cannot see anything positive about this idea. Why would you even consider it?

The first year's withdrawal is almost 15%? Do you need $70K income from a 500K portfolio? You have alluded to having assets in multiple places but the overall picture is not clear.

You're already talking about 40/60 and even 30/70 AA's which don't make any sense for someone in their 50's. Annuities make even less sense.

[scrabbler1]

While I have been with Fido since 1990 (and have had an account with Mellon, previously called Dreyfus-Mellon), I didn't start increasing my involvement with their local office's reps until 2008, 7 months before I ERed.

I went through a few different reps ("Account Executives") between 2008 and 2010 until I finally got a good one I have been with for the last 10 years. That first rep I dealt with in 2008 helped me set up their RIP program which was helpful in getting a second opinion for my ER planning I had been ramping up for about a year. She soon left the local office but the next rep was also very good, handling my rollover IRA and helping me get my ER started on the right foot.

But that man left the local office in late 2009 and I was handed off to rep #3. But before I could meet with him, another rep called me who was, as I would find out later, trying to poach me. This rep, whom I will call Mr. Pushy, wanted to take over managing my portfolio for a fee. I spent two rather miserable hours meeting with him one afternoon in 2010. By the time I had gotten back to my car, I had already mentally written a letter to his boss, the office manager, detailing my experience with Mr. Pushy and requesting I be switched to another rep. The manager called me after getting my actual letter and switched me back to rep #3, the man I have dealt with ever since. I have met with him every 12-18 months to get his input on things and to update the RIP program's data.

In 2012, after my (snake-bit) friend received a large inheritance, I had him meet with my Fido rep and he is also now a Fido client. I help manage his portfolio which has included consolidating his other investments into Fidelity such as a Roth IRA and a smaller brokerage account held elsewhere. He did get a bonus for some of those moves.

While my experiences with Fido have been good, I have encountered a growing list of small gripes about Fido and its usually good website. A few months ago, the current office manager happened to call me to ask about my experiences with my Fido rep and anything else Fido-related. I let her know about my Fido gripes, which she suggested I let my rep know in writing (I always let him know over the phone or in person later on). I have collected my scattered gripes into a Word file and at some point will formalize them into an email to my rep. Some of those gripes I had told a high-ranking person in the Fido home office over the years which once paid off nicely when they did something big about one of them.

[SnowballCamper]

If you run Firecalc for fixed annual income (0%inflation) of 70,800=5,900*12 and 0% in equities you also get 100% success for seven years.

The output states, "The lowest and highest portfolio balance at the end of your retirement was $11,625 to $478,000, with an average at the end of $58,651". So you're paying from $11,625 to $478,000, with an average at the end of $58,651 for that guarantee. Is it worth it to you?

Arguably this isn't the intended use of the calculator, but I think it adds perspective to what you're paying when you buy an annuity.

[doneat54]

Quote:

Originally Posted by LarryMelman I cannot see anything positive about this idea. Why would you even consider it? The first year's withdrawal is almost 15%? Do you need $70K income from a 500K portfolio? You have alluded to having assets in multiple places but the overall picture is not clear. You're already talking about 40/60 and even 30/70 AA's which don't make any sense for someone in their 50's. Annuities make even less sense.

The $500k is not the whole portfolio, only a decent minority fraction of it. And 40/60 and even 30/70 AA's do make sense when you are already retired in your 50s.

[doneat54]

Quote:

Originally Posted by SnowballCamper If you run Firecalc for fixed annual income (0%inflation) of 70,800=5,900*12 and 0% in equities you also get 100% success for seven years. The output states, "The lowest and highest portfolio balance at the end of your retirement was $11,625 to $478,000, with an average at the end of $58,651". So you're paying from $11,625 to $478,000, with an average at the end of $58,651 for that guarantee. Is it worth it to you? Arguably this isn't the intended use of the calculator, but I think it adds perspective to what you're paying when you buy an annuity.

Yes, and stewing on this for a few days now, and in addition to the insights from this thread, I'm thinking this a non starter. And although we still like this guy, his reaction to when I just say "this is not something we have decided to pursue, let's move on" will determine a lot about our future relationship. He does have a lot of game left here if he wants it, with me moving my Prudential holdings to FIDO if it goes that way. The value that I really see him (potentially) providing is helping us come up with an income stream strategy for the long haul, given all our holdings. Something that I personally haven't given a whole lot of thought to as yet, but this annuity idea he's pitched to bridge us to SS is something that I really can't see much upside for us.

Thanks again for the insights/opinions, they are helpful.

[scrabbler1]

Quote:

Originally Posted by doneat54 The $500k is not the whole portfolio, only a decent minority fraction of it. And 40/60 and even 30/70 AA's do make sense when you are already retired in your 50s.

Certainly makes sense to me. I am 57, have been retired for 12 years, and have an overall AA of 38/62. In taxable, it's a little more tilted toward bonds, in the rollover IRA I can't yet access, it's closer to 50/50.

[nwsteve]

Quote:

Originally Posted by doneat54 Yes, and stewing on this for a few days now, and in addition to the insights from this thread, I'm thinking this a non starter. And although we still like this guy, his reaction to when I just say "this is not something we have decided to pursue, let's move on" will determine a lot about our future relationship. He does have a lot of game left here if he wants it, with me moving my Prudential holdings to FIDO if it goes that way. The value that I really see him (potentially) providing is helping us come up with an income stream strategy for the long haul, given all our holdings. .

We have had to "train" our Fido person whenever we have gotten a new one--usually because our orig one was promoted. The good ones listen and learn. It has not been unusual early in a new relationship to have the new rep suggest an annuity. We make it clear that is not a topic for discussion unless we ask. The good ones may inquire our reason but then quickly move along to better understand what they can do for us. I have found asking the new rep to explain what he knows about their income planning tools and to show them to me. You should get a pretty good idea how equipped they are to be of help.

[LarryMelman]

I just don't get why Fidelity pretty much ignores me. I've been with them since the 1980's, at one point I had over $2M with them across several accounts. When I moved over half of it to Schwab, they didn't say anything. I occasionally visit the local office and yes, I take a free cup of coffee but I don't stuff my pockets with sugar packets or etc. No one has ever offered to be "my rep". Years back I attended some seminars advertised on the web site, but they never invite me to anything.

I mean, I suppose I'm glad that no one is pushing product at me, it's never happened. But it's like I'm on Fidelity's naughty list.

[bada bing]

Quote:

Originally Posted by LarryMelman I just don't get why Fidelity pretty much ignores me. I've been with them since the 1980's, at one point I had over $2M with them across several accounts. When I moved over half of it to Schwab, they didn't say anything. I occasionally visit the local office and yes, I take a free cup of coffee but I don't stuff my pockets with sugar packets or etc. No one has ever offered to be "my rep". Years back I attended some seminars advertised on the web site, but they never invite me to anything. I mean, I suppose I'm glad that no one is pushing product at me, it's never happened. But it's like I'm on Fidelity's naughty list.

You may be like me. I suspect I have notes in my files at Fido and Schwab about being a lost cause as a sales lead. I have been to a couple of nice dinners hosted by my Schwab rep, but all we ever talked about was local sports and the micro-brews being served. I'd go again, but there haven't been invites in the last couple years.

There isn't a Fido office anywhere nearby and my assigned Fido rep is 3000 miles away. Nice gal, she just got back from an extended maternity leave last month. I have never heard from her unless I call to do a rollover or something that requires her mouse clicking.

[Oilcan]

Yesterday I got a "Have a Happy Holiday" card personally signed from Abigail Johnson. Guess I'm on the special list at Fidelity!

[H2ODude]

We're a private client account at Fido, have been with them since 90's. Have a local office that I find a real positive, opened maybe 10-15 years ago. We're on our third "representative." The second one sort of pushed for an annuity to cover DW needs if I go first, my pension stops with me. In reality, there's more than enough for her in the portfolio if I check out as I write this. She's just not interested in managing money. I've appreciated having the reps available, but really not used much other than to confirm that no, I'm not crazy in what I'm doing. Had a pitch last year for them to manage but it just seemed like my set it and forget it was the more productive means to do it.

I've looked at various immediate annuities over the last few years and the payouts are just too low, I assume given the interest rate environment. We have a substantial amount of CD's maturing this December and at this point have no idea what to do with that money. I had it parked there (in tIRA) when MRD's were to kick in at 70 and had figured, meh, will decide what to do then. I guess it will now just go to more Roth conversions, into what in the Roth I don't know. Definitely what one could call first world problems.

[PatrickA5]

Quote:

Originally Posted by LarryMelman I just don't get why Fidelity pretty much ignores me. I've been with them since the 1980's, at one point I had over $2M with them across several accounts. When I moved over half of it to Schwab, they didn't say anything. I occasionally visit the local office and yes, I take a free cup of coffee but I don't stuff my pockets with sugar packets or etc. No one has ever offered to be "my rep". Years back I attended some seminars advertised on the web site, but they never invite me to anything. I mean, I suppose I'm glad that no one is pushing product at me, it's never happened. But it's like I'm on Fidelity's naughty list.

That's nothin'. In order to get a return phone call with my rep I have to make an appointment 3 weeks out for him to call me. Emails take weeks for a response. So, If I need anything I call the main premium line. They've always been quick and give good information.

Even though we have all of our retirement accounts with FIDO, we must be way down the list of the worthy. I'd love to go to a seminar - even if they're just trying to sell me something - just to know they realize I exist. I'll even sit in a separate room for the lesser people (if the food's good).

[OldShooter]

I think if you're getting poor service at Fido (or anywhere), you should call the branch manager. Service is what they are selling and any manager with an IQ above room temperature should understand that. The fact that I get excellent service from Schwab is IMO more likely because I lucked out in the rep assignment lottery than because Schwab has major genetic superiority to Fido.

[Ready]

I used to have access to a financial advisor at Vanguard for no charge but I recently called them to speak to one and found out they eliminated this benefit. Now they want me to pay them a percentage of assets based fee for their financial advisory services. I can still call them and ask general questions about their funds but I can’t expect someone to review my overall portfolio and provide advice any more unless I pay them.

So at this point it sounds like Fidelity offers the perk of free advice while Vanguard does not. That may be something to consider when deciding which brokerage firm to choose.

[pb4uski]

Quote:

Originally Posted by doneat54 Got this quote tonight from the FIDO rep for an annuity: Monthly Income Payment: $5,900.00 Annuity Source of Funds: Traditional IRA Annuity Option: Period Certain Annuity Purchase Payment: $478,201.47 Cost Basis: $0.00 Taxable Amount: $5,900.00 Payment Frequency: Monthly Period Certain: 7 Years Total of Payments $495,600.00* So if I am reading this right, I get $495,600.00 in total payments ($5900x84 months) for $478,201.47. So a net gain of $17,398 over 7 years (?). According to Moneychimp's CAGR calculator, that is a 0.51% CAGR. Its from MassMutual BTW, looks like they rate pretty high. Ok, some growth, and immunity from market crashes, yes. But the loss of flexibility I'll have bugs me a bit. And thanks for all the insights above, very helpful.

MassMutual is a great company, but the IRR in the annuity is equivalent to about 0.48% as you have concluded. Bad part is that you have $478k tied up. I think you can do the same or better with a CD ladder and you won't have the money tied up. The problem is that the CD ladder isn't as near as good for Fido or your Fido rep as the 7 year annuity.

Actually, even an online bank account would pay 0.5% (could go down or could go up in the future) and be FDIC insured and totally flexible in terms of access to that money.... you could put the $478k in an online savings account, arrange an automatic transfer to your checking account of $5,900 a month and be ahead.

Or if your willing to take on a bit more risk there are other alternatives that would pay more.

[Onward]

They left out the lines showing what MassMutual and Fidelity make on the annuity?

They must have just forgotten to include those.

[pb4uski]

^^^^ Helpful.... actually, not.

How is that relevant to the decision? If they both make a lot or $0 how does it change the OP's decision? It doesn't.

What is relevant is what other alternatives the OP has available to them to meet thier financial needs and what they return and what risks they entail.

[Onward]

The more they make (especially relative to what OP makes) they more they are motivated to give OP bad, self-serving advice.

Very relevant.

[pb4uski]

About the only thing that the OP might find out is the commission that Fidelity receives from MassMutual for selling the annuity.

[ncbill]

Quote:

Originally Posted by H2ODude We're a private client account at Fido, have been with them since 90's. Have a local office that I find a real positive, opened maybe 10-15 years ago. We're on our third "representative." The second one sort of pushed for an annuity to cover DW needs if I go first, my pension stops with me. In reality, there's more than enough for her in the portfolio if I check out as I write this. She's just not interested in managing money. I've appreciated having the reps available, but really not used much other than to confirm that no, I'm not crazy in what I'm doing. Had a pitch last year for them to manage but it just seemed like my set it and forget it was the more productive means to do it. I've looked at various immediate annuities over the last few years and the payouts are just too low, I assume given the interest rate environment. We have a substantial amount of CD's maturing this December and at this point have no idea what to do with that money. I had it parked there (in tIRA) when MRD's were to kick in at 70 and had figured, meh, will decide what to do then. I guess it will now just go to more Roth conversions, into what in the Roth I don't know. Definitely what one could call first world problems.

Yep, the paid retirement calculators I use (e.g. MaxiFi) don't recommend immediate annuities until around age 80!