Advisor Suggested Annuities?

[rathgar]

So DH spoke with (Merrill Lynch) advisor and she suggested we move our money into annuities because we are risk aversive!

As per a previous post about ML, I don't trust anything this advisor suggests (thankfully I kept our 100K in cash for emergency fund.....not looking so stupid at this moment).

You are all WAY more knowledgeable about these things than we are:
please tell me why annuities is not the way to go.

Thanks all.

 

[Lakewood90712]

RUN in the opposite direction

 

[Aerides]

A) making a change now is a bad idea (see your other thread). You'll lock in your losses.

B) annuities are great for sales people, bad for customers, 99% of the time.

Do nothing, stop asking FA's what to do (pro-tip, they don't know any better and everyone is going to try to sell you their products, now more than ever.)

 

[rathgar]

Yes, you are right about talking with these people - that's why I come to this board - you all speak the truth.

 

[RobbieB]

If you call a broker all worried about your equities don't be surprised if they suggest fixed income.

 

[jazz4cash]

. As per a previous post about ML, I don't trust anything this advisor.

It seems you’ve answered your own question!

 

[harley]

Yes, you are right about talking with these people - that's why I come to this board - you all speak the truth.

Absolutely right. And if you keep reading we'll present you with a large number of truths. Then you just need to figure out which one(s) you like.

 

[CaliKid]

I might be a contrarian but annuities are really great for risk adverse people. However, don't invest all in one company. You would want to spread it out with different companies to spread your risk. Yes, annuities have high commissions but they offer security that a lot of people want. I have considered it myself for some of my investable assets.

 

[Rainbowdash]

If you can't stomach the ups and downs of the stock market then annuities may be right for you. But for most of us DIY investors, annuities high fees, subpar investment returns, is always a no no

 

[capjak]

Depends on the type of annuity being recommended there are so many. Many can be used as fixed income alternative/comparable, but are not stock alternatives (i.e. if you want stock growth than you need to invest in stock market and take the risk with it). If you want another option to compete with CDs than MYGA for FIA can work, just know you will achieve 0-4% return like a CD.

 

[brewer12345]

Run. In a nutshell, annuities are generally a bad idea because they are generally extremely high fee, so complicated that it is unlikely you will understand what you are buying, and often you are exposed to the creditworthiness of the insurer.

 

[Onward]

Annuities are a great way to safely go broke.

 

[ShokWaveRider]

Heed this advice:

 

[corn18]

If they are suggesting variable or index annuities, RUN AWAY! If they are talking about life insurance products, RUN AWAY! If they are talking about SPIAs (Single Premium Immediate Annuity), then maybe. But I have never had an FA anywhere, ever recommend a SPIA. It's always the more lucrative (for them) variable, index or life insurance type annuity.

SPIAs make sense for longevity insurance, but because interest rates are at the lowest in history, they are not a good deal right now. The only way they make sense right now is if you are approaching age 80. You can do better in CDs or a high interest savings account than what a SPIA is currently paying.

So, RUN AWAY!

 

[VanWinkle]

An Immediate annuity with a one time lump sum may help you increase your income for life without any stock market risk. Do not purchase this from someone getting 1% of your assets under management as the return is in the 2-3% range. They will tell you 6%, but most of it is just the return of your own money.

You can check how much income you can buy with a quote from:

https://www.immediateannuities.com/...yDhTa23adNe1Yrw2R_SumisMMe3wZvq3KC0QNeLRz4OD7

Please note I do not have an annuity, I am not as risk adverse as you may be.

They are really just taking your money and giving you some of your own money back with about 2% interest. You could do this easily yourself without giving up access to the money to an Insurance company.

Good luck to you,

VW

 

[ShokWaveRider]

They are really just taking your money and giving you some of your own money back with about 2% interest. You could do this easily yourself without giving up access to the money to an Insurance company.

Exactly what we do, but we are getting ~4% not 2 and only tie up our money for 5 or 10 years Max.

 

[Hermit]

My goood friend that we just got moved into an alzheimer's facility moved his IRA into an annuity in 2012 because a freind's nephew was selling them. I looked at the contract and could not decipher it. Took it to the elder care lawyer and she could not decipher it. She advised his wife to just pull the money out and pay whatever fees there are because she needs the cash to get her life set up for both her and her husband. It will not be cheap. She would have been better off leaving it in a savings account back in 2012.

 

[Katsmeow]

What brewer12345 said. Also you will lock in your current paper losses.

 

[LOL!]

If one goes to a sales rep and tells them that they want to preserve capital and not lose money, then the sales rep will sell them annuities. That is, I don't think one can fault the ML sales rep in this case for suggesting annuities.

Besides the money that the sales rep will make there is also usually an onerous early withdrawal penalty.

So will @rathgar become less risk averse? Will they find an asset allocation without using annuities that will make them happy? If they lose money in the first year, then will they be able to continue on and over time make money? How long could they last before bailing out? I cannot tell just from what was posted in this thread.

 

[VanWinkle]

Exactly what we do, but we are getting ~4% not 2 and only tie up our money for 5 or 10 years Max.

+1

 

[Jerry1]

I think it's appropriate to understand annuities and I'm not surprised that any broker would suggest them, especially since you stated that you are risk adverse. The important thing is to take your time and remember the golden rule - do not buy into anything you don't understand.

I have a very small annuity. At the time I bought it, I thought it would be a good addition to my investments. I understood exactly what I was buying and I'm happy with it. As with any insurance, it's a gamble. If I live long enough, it will be a nice investment. In any case, it's beer money that's pretty secure (I won't use the term guaranteed). OTHO, my in-laws bought a bunch of annuities and riders. It's not a stretch to say that the sales person had no business selling these to a couple in their late 70's early 80's. No one really understood what they bought. Now, FIL has passed and MIL has Alzheimer's and is in a memory care unit. DW has had to try to sort all this out and make the most of the situation in order to provide the most money, which translates to the best care, they can obtain. It's been hell. DW's sister wants to sue, but the reality is that the company is following the contract. The worse aspect of it is that one of the provisions had a ten year holding period - FOR AN EIGHTY YEAR OLD! So, there is plenty of reason for people to have a bad view of the industry and the product, but it can be a reasonable product if you know and understand exactly what you're buying. Take your time.

 

[Souschef]

I have said this a number of times, but when DW's husband died, a "friend" sold her annuity to "protect" the life insurance payment. He made between 3K and 7K while "helping" her.

 

[OldShooter]

This attempted robbery illustrates the fact that houses like Merrill are a poor choice for small investors. They want big fish who will pay for management and who are totally ignorant of performance. The little accounts are simply targets of opportunity.


Some of the big houses will not pay reps on accounts under $100K.


IMO its Fido, Schwab and VG for us little fish.

 

[Bruno]

I have three annuities and two of them are pretty good deals. The two i like are fixed income one is paying 3.92% with a 10 % free withdrawal each year. I have annuitized the other fixed income for the next 5 years during retirement. The annuity i don't like is a variable for 8 years.

Yes with MOST annuities you need to read the small print and don't put any money in an annuity if you are going to need it. I would agree most annuities are not that good but some have a place where they can be very effective in retirement.

This is not the best place to ask about annuities. Annuity here are ALL lumped into one pot and I would guess most people that reply here that say "Run as fast as you can" or "they are terrible " have never owned an annuity. Not many here will say anything positive about Annuities.

 

[VanWinkle]

People will buy annuities no matter how much they read or know. Some people just need that feeling of security that they believe an annuity provides. How much it costs, as long as they can't see it, is not a consideration.