Variable Rate Annuity

[Symplelife]

I am due to receive a small inheritance (about $100,000) and a financial advisor from TIAA suggested that I invest it in a TIAA variable rate annuity (I have a retirement account already set up with them). He mentioned that the annuity invests in a wide variety of mutual funds and the money could be liquidated at any time with no surrender fee. I understand that there would be other fees associated with the account (I’m seeing various amounts), and the rate would fluctuate with the market. This is thankfully money I don’t need to survive, but I also don’t want it to disappear. Is there a better option for these funds? I’d like to retire within the next year and am not planning to tap into this money for quite awhile (5-7 yrs). I’m open to any suggestions and would appreciate your thoughts on the VRA. Thanks!

 

[joeea]

If you don't fully understand the fees ("I'm seeing various amounts"), then you shouldn't invest in it.

You might want to ask about the advisor's commission on this transaction. That might turn out to be interesting.

Annuities are complex insurance policies. There are plenty of simpler options. If you really want something that fluctuates with the market, just invest in an index fund, rather than an annuity.

The fact that you indicate $100,000 is a "small inheritance" suggests that you have a lot of other money invested. How is that invested? Why should you treat this new money any differently?

 

[Huston55]

OP-

All of your posts have sought advice, mostly regarding annuities. That’s fine but, if you want meaningful feedback, you need to provide more details on your situation.

A quick review of your posts reveals that you already have most of your NW tied up in annuities, and that SS + annuities will provide most of your income in retirement. With only that info, why would you want another annuity? What kind of liquidity would you have after purchasing another annuity?

 

[Sunset]

OP - my recent experience with annuities (not mine) shows me that you will have a lot less money in 5-7 years by putting it in an annuity, compared to a very conservative 50/50 bond/stock fund.

Simply think about annuities, the company selling them makes money from them (you) each year, the salesman (advisor) makes a commission to sell it, or he/she will sell you a different company annuity.
They never tell you in 1 line the total fees, because the fees are huge and hidden.
Whatever the company invests the money in, it will have costs for doing so, those are paid by (you).

My default investment for conservative types is Vanguard Wellington fund.

 

[golfnut]

Vanguard Wellesley Fund. Check it's near 40 year record. Average about 7% a year and low expenses. Won't hit a home run but will hit alot of singles/doubles with it.

 

[Red Badger]

Index funds (50/50 stock/bonds) with very low ER?
For safety of principle, a CD ladder?
Like others noted, stay away from annuities unless you completely understand every detail (and once you do, you'll likely despise annuities).

 

[Symplelife]

Thank you for the advice and great suggestions for an alternative to the annuity. I don’t necessarily want the volatility so Wellesley or the CD ladder option might be good choices.

 

[HadEnuff]

Thank you for the advice and great suggestions for an alternative to the annuity. I don’t necessarily want the volatility so Wellesley or the CD ladder option might be good choices.

Keep in mind that with Wellesley you are investing in Stocks (about 1/3) and Intermediate Term Bonds (about 2/3)... and hence, not completely shielded from the effects of stock market volatility, particularly if a drop in equities is precipitated by a rise in interest rates.

 

[golfnut]

Keep in mind that with Wellesley you are investing in Stocks (about 1/3) and Intermediate Term Bonds (about 2/3)... and hence, not completely shielded from the effects of stock market volatility, particularly if a drop in equities is precipitated by a rise in interest rates.

True that. No escaping risk either w/ stocks, bonds or inflation. Gotta pick your poison.