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Old 01-26-2021, 07:35 AM   #81
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^^^^ 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.



Well as I said earlier, this $0.5M would be a minority of the portfolio. The rep suggested funding it out of one of our IRAs. Concern I would have with that is the tax ramifications. Wouldn't taking another $0.5M out to buy the annuity bump us WAY up in the tax brackets, or are the taxes due only over the period of the annuity with only each monthly annuity payment taxed as income?



Moot, as I am not going to be doing this, but curious. The more I can learn the better.
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Old 01-26-2021, 08:11 AM   #82
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Yesterday I got a "Have a Happy Holiday" card personally signed from Abigail Johnson. Guess I'm on the special list at Fidelity!
Nah I got one too. I do get a free Turbo Tax copy every year tho.
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Old 01-26-2021, 09:05 AM   #83
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Well as I said earlier, this $0.5M would be a minority of the portfolio. The rep suggested funding it out of one of our IRAs. Concern I would have with that is the tax ramifications. Wouldn't taking another $0.5M out to buy the annuity bump us WAY up in the tax brackets, or are the taxes due only over the period of the annuity with only each monthly annuity payment taxed as income?



Moot, as I am not going to be doing this, but curious. The more I can learn the better.
You can buy an annuity (so many kinds) with IRA and 401K funds without the immediate tax hit. I just did a Google on that myself and found this out.
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Old 01-26-2021, 09:29 AM   #84
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...
How is that [commissions and fees] 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 their financial needs and what they return and what risks they entail.
Yahsbut: The commissions and fees buried in a product's price subtract directly from the value that the purchaser actually receives. So I can look at, for example, the extended warranties that Best Buy sells and, knowing that they are immensely profitable for the salesperson and the company, decide to look somewhere else for protection or to go naked.

Same-o with an annuity where I can find out the commissions and fees. This is very relevant to my decision because it enables me to decide whether to keep shopping or to buy. Here, I think it's reasonable to suspect that the value of this FIDO annuity to the OP is, from their reputation at least, likely to be less than one from TIAA. Hence, the decision to shop the product, looking at those other alternatives. The shopping would be much easier though if the vendors each listed their built-in commissions and fees. Possibly these documents would be delivered by flying pigs.
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Old 01-26-2021, 09:35 AM   #85
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Well as I said earlier, this $0.5M would be a minority of the portfolio. The rep suggested funding it out of one of our IRAs. Concern I would have with that is the tax ramifications. Wouldn't taking another $0.5M out to buy the annuity bump us WAY up in the tax brackets, or are the taxes due only over the period of the annuity with only each monthly annuity payment taxed as income?



Moot, as I am not going to be doing this, but curious. The more I can learn the better.
You wouldn't normally take money out of your tIRA to buy the annuity because the amount withdrawn would be taxable income... rather, the tIRA would buy the annuity so the annuity would become an asset of the tIRA just like a ETF or mutual fund is an asset of the tIRA.

Assuming that the annuity benefit is paid to you for spending then the annuity benefit would be income just like any other tIRA withdrawal. Similarly if you replaced the annuity with a CD ladder then the CDs would be assets of the tIRA and money withdrawn from the tIRA for spending would be income.
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Old 01-26-2021, 09:45 AM   #86
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Yahsbut: The commissions and fees buried in a product's price subtract directly from the value that the purchaser actually receives. So I can look at, for example, the extended warranties that Best Buy sells and, knowing that they are immensely profitable for the salesperson and the company, decide to look somewhere else for protection or to go naked.

Same-o with an annuity where I can find out the commissions and fees. This is very relevant to my decision because it enables me to decide whether to keep shopping or to buy. Here, I think it's reasonable to suspect that the value of this FIDO annuity to the OP is, from their reputation at least, likely to be less than one from TIAA. Hence, the decision to shop the product, looking at those other alternatives. The shopping would be much easier though if the vendors each listed their built-in commissions and fees. Possibly these documents would be delivered by flying pigs.
I agree with the idea of shopping but what embedded comp to the producer is doesn't matter to me... what matters to me is what I get relative to other alternatives available to me.

IOW, all else being equal if I have a choice between a product that pays me 3% APY after a 2% commission to the producer and another pays me 2% APY after a 1% commission to the producer, I'll chose the first product every time... every time. So I dont really need to know what the producer gets.

Just like if I really want an extended warranty and all else being equal Warranty A costs $100 and Warranty B costs me $200, I'll take Warranty A even if the commission to the producer on Warranty A is more than the commission to the producer on Warranty B.... I don't need to know what the producer receives or what the issuer makes on the warranty to make the best decision for me.
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Old 01-26-2021, 10:07 AM   #87
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I have not had particularly good experiences with Fidelity reps. But one was really bad. I posted this on the Fidelity forums a few years ago:

Been getting calls from a Fidelity rep to come in and review my account so I figured why not? So my wife and I go meet this guy. I printed out screen shots of all our holdings including my work 401K which he'd have no access to seeing. He basically just looked at the Fidelity Retirement Calculator I had already filled out before. First thing out of his mouth is how they could make me more money by managing my money for a mere 1%. I told him I wasn't interested and preferred to do my own managing. He tried to tell me I was way too aggressive as I was 96% equities. Three times I had to tell him I had $200K in cash and bonds in my 401K! He never looked at the printouts I brought in. Then he told me my funds and stocks were very aggressive and I had no stocks like Home Depot, etc. I told him actually I do own Home Depot as well as T, JNJ, etc! He just never looked! He then told me all my funds were 100% stocks. I told him I own Puritan and T Rowe Price Cap Appreciation and he told me these are 100% stock funds and he knows these funds like the back of his hand!

By this time I'm actually getting angry and we're half arguing. I told him my goal is to beat the S&P and he checks my performance on my account ( he still hasn't even looked at my wife's account) and sees I'm trailing the S&P by about 1%, so I'm really not doing to well. I tell him to check my wife's account to and he finally does and sees her account is beating the S&P by 11%-10% 10% for the 1-3-5 year periods and he changes his tone a bit. Now I'm doing well and obviously know what I'm doing (that's debatable ) and we should just continue on with what we're doing.

All in all a terrible waste of time and this guy was actually incompetent. He never even asked us if we had any debt or anything. I'm almost tempted to write Fidelity and tell them how bad this experience was.
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Old 01-26-2021, 10:23 AM   #88
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I agree with the idea of shopping but what embedded comp to the producer is doesn't matter to me... what matters to me is what I get relative to other alternatives available to me....
Yup, as usual we basically agree. We both shop for value. I submit, though, that where internal costs are higher, value is almost inevitably lower. The TANSTAAFL rule applies. So knowing and looking at costs is useful.
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Old 01-26-2021, 11:21 AM   #89
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I have not had particularly good experiences with Fidelity reps. But one was really bad. I posted this on the Fidelity forums a few years ago:

Been getting calls from a Fidelity rep to come in and review my account so I figured why not? So my wife and I go meet this guy. I printed out screen shots of all our holdings including my work 401K which he'd have no access to seeing. He basically just looked at the Fidelity Retirement Calculator I had already filled out before. First thing out of his mouth is how they could make me more money by managing my money for a mere 1%. I told him I wasn't interested and preferred to do my own managing. He tried to tell me I was way too aggressive as I was 96% equities. Three times I had to tell him I had $200K in cash and bonds in my 401K! He never looked at the printouts I brought in. Then he told me my funds and stocks were very aggressive and I had no stocks like Home Depot, etc. I told him actually I do own Home Depot as well as T, JNJ, etc! He just never looked! He then told me all my funds were 100% stocks. I told him I own Puritan and T Rowe Price Cap Appreciation and he told me these are 100% stock funds and he knows these funds like the back of his hand!

By this time I'm actually getting angry and we're half arguing. I told him my goal is to beat the S&P and he checks my performance on my account ( he still hasn't even looked at my wife's account) and sees I'm trailing the S&P by about 1%, so I'm really not doing to well. I tell him to check my wife's account to and he finally does and sees her account is beating the S&P by 11%-10% 10% for the 1-3-5 year periods and he changes his tone a bit. Now I'm doing well and obviously know what I'm doing (that's debatable ) and we should just continue on with what we're doing.

All in all a terrible waste of time and this guy was actually incompetent. He never even asked us if we had any debt or anything. I'm almost tempted to write Fidelity and tell them how bad this experience was.
Your experience appears somewhat similar to the one I had back in 2010 with Mr. Pushy, a Fido rep who tried to poach me from another rep (and I wrote about back on page 3 of this thread). We weren't on the verge of arguing like you were with your guy. But my Mr. Pushy was strongly insisting he take over managing my portfolio even though I had been managing my own portfolio for nearly 20 years including just over 1 year in ER.

One big difference between yours and mine was that Mr. Pushy was my AE (Account Executive) and I surely didn't want him as my AE any more. That's why I immediately wrote a letter to his boss, the office manager, demanding to be switched to another AE. The manager soon called me back and did as I asked. I learned a few years later that Mr. Pushy didn't last too much longer at that office or with Fido in general. (Big surprise, I thought to myself!)
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Old 01-26-2021, 11:36 AM   #90
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Yup, as usual we basically agree. We both shop for value. I submit, though, that where internal costs are higher, value is almost inevitably lower. The TANSTAAFL rule applies. So knowing and looking at costs is useful.



If I buy a new car at dealer A for $30k and the salesman gets an 8% commission and then go to dealer B and he gives me his best price of $32k and he only gets a 4% commission I'm going with dealer A. Dealer A could be much larger and move many more cars aggressively or have any number of reasons(lower overhead etc) incentives to price lower. I don't really care what their motives are.
I agree with pb4uski.
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Old 02-02-2021, 12:02 PM   #91
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Considered asking this question in a separate thread, but since it is all related (for now) to this FIDO consulting engagement, I'll do it here.


The annuity is out, and I am thinking about coming up with my own income retirement plan for this 7 year window between DW retiring and SS for both of us, prior to our Zoom with the FIDO guy this Friday. And what I am thinking is the classic 3 bucket strategy, with maybe some post tax cash or cash like assets held separately somewhere for "lump" or splurge purchases (DW is talking about wanting another RV). The goal is the usual keep 2-3 years worth of expenses almost immune to fluctuations (bucket 3), moderately invest bucket 2 (2-5 years expenses?) and fairly aggressively invest the remaining bucket one. Another goal is keeping taxes in check which is why I think about keeping a pile of post cash handy so a splurge won't send us into the tax abyss. Also keeping in mind that once we get past the 7 year stretch, we could live off of SS if we really had to.


I gather reading here that the 3 bucket approach is not widely regarded. Reason's why not? Pro's/Con's of what I describe above?
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Old 02-02-2021, 12:12 PM   #92
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If I buy a new car at dealer A for $30k and the salesman gets an 8% commission and then go to dealer B and he gives me his best price of $32k and he only gets a 4% commission I'm going with dealer A. Dealer A could be much larger and move many more cars aggressively or have any number of reasons(lower overhead etc) incentives to price lower. I don't really care what their motives are.
I agree with pb4uski.
Sounds like you are agreeing with me. Go for value.

My point is that in these competitive markets, where internal costs that do not benefit the buyer are are higher, "value is almost inevitably lower."

There is an infinite number of made-up examples like yours, plus certainly a few real examples, where value is not lower due to internal costs being higher. That is simply arithmetic and in the case of possible real examples, the reason for the word "almost."
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Old 02-02-2021, 12:18 PM   #93
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Sounds like you are agreeing with me. Go for value.

My point is that in these competitive markets, where internal costs that do not benefit the buyer are are higher, "value is almost inevitably lower."

There is an infinite number of made-up examples like yours, plus certainly a few real examples, where value is not lower due to internal costs being higher. That is simply arithmetic and in the case of possible real examples, the reason for the word "almost."

Yes. Fair enough and I did make up an example.
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Old 02-23-2021, 08:54 AM   #94
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Had another call with rep. He is pushing (not obnoxiously) the annuity again. His upside claim is that it "simplifies things". I just updated a cash savings account spreadsheet in local bank last night and saw an interest payment for last month equating to almost exactly 1% on a $200+ balance. His annuity IRR is 0.5%. Seems like a no brainer, am I missing anything?



Dump the cash in the local bank, set up automatic transfers, get 1% interest, and still have full access to switch gears, adjust, stop and go a different direction.

OR


Take the annuity, get automatic dispersiona, get 0.5% interest, and have no flexibility/liquidity.


I know I am preaching to the choir.


The other thing is he said that I would have to worry about re balancing those investments/cash over time, less work, etc. I told him that I actually find managing this portfolio and seldom see it as a chore of any kind.


Might be a good poll topic, but I'd be interested to how the readership views managing a portfolio after retirement.

Fun!
I like it in short doses.
Don't like it, but do it anyway
Hate it, close to paying someone to do it (But I'm only paying min wage...LOL)
I'd rather shove bamboo splinters under my fingernails


Anyway, still like the rep, but annuity is out, I think we'll quit the semi monthly Zoom calls for now, and I'll just send him questions via e-mail when they come up. He did have some good ideas about how/when to do Roth conversions after DW retires, some tax savvy advice in other areas however.
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Old 02-23-2021, 11:13 AM   #95
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... Might be a good poll topic, but I'd be interested to how the readership views managing a portfolio after retirement.

Fun!
I like it in short doses.
Don't like it, but do it anyway
Hate it, close to paying someone to do it (But I'm only paying min wage...LOL)
I'd rather shove bamboo splinters under my fingernails
Not sure how to answer. We have been tidying up for several years, trading out of a few small stock positions in local companies that DW liked, various equity funds that accreted like barnacles. Finally a few months ago we finally got the equity tranche down to just one fund. So our "management" will consist of looking at the portfolio (as we have been doing) once a year between Christmas and New Year.


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... Anyway, still like the rep, but annuity is out ...
If I had a rep that pestered me with ideas I had already rejected and bought up superfluous arguments about the burden of rebalancing, he/she would quickly be a former rep. I tell my Adult-Ed investment class that hiring an FA is like hiring a lawn service. You are hiring to have specific tasks done; you are not hiring a friend. That said, cordial and professional relations are important, but they are secondary to evaluating the lawn service's FA's work.

The reps, OTOH, try to be seen as friends because friends don't challenge friends, friends don't pull assets from friends, etc. One of the best I have seen is a snaky woman from Morgan Stanley who publishes a monthly client newsletter, like a Christmas letter, chatting about her personal life and the personal lives of her staff. Just like she was actually a friend instead of a hired gun. Her clients have warm feelings about her, despite that the equity portfolio I evaluated underperformed by 3-5%.
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Old 02-23-2021, 08:22 PM   #96
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Had another call with rep. He is pushing (not obnoxiously) the annuity again.
Your threshold of obnoxiousness must be pretty high.

I would suggest that if you said "no" and he has proposed it again anyway, that he has you labeled as a "mark" that he can eventually sell to if he overcomes your objections or finds the right button. Is that how you want to be viewed?

I'd find the branch manager and ask for a different rep, being very clear as to why.
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Old 02-23-2021, 09:22 PM   #97
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More specifics on the annuity?

I recently bought a SPDA as a private placement through FIDO paying 1.7% for 3 years. This was an alternative to the 3yr rung on my CD ladder. Min purchase was $100k
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Old 02-24-2021, 08:42 AM   #98
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Your threshold of obnoxiousness must be pretty high.

I would suggest that if you said "no" and he has proposed it again anyway, that he has you labeled as a "mark" that he can eventually sell to if he overcomes your objections or finds the right button. Is that how you want to be viewed?

I'd find the branch manager and ask for a different rep, being very clear as to why.
Doneat54, I second this. As I wrote earlier in this thread, I had a pushy AE and sent a request in writing to the branch manager to be switched to someone else, specifying the reason why. I was switched immediately. You need to rid yourself of this person.
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Old 02-24-2021, 10:14 AM   #99
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If he's pushing an annuity, he's obnoxious.
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