Intro and questions about Ameriprise accounts

[willongo]

Uh-oh, you cannot contribute $5,000 to an IRA* and $5,000 to a Roth IRA during a single year. You can contribute a maximum of $5,000 to an IRA or a Roth IRA, not both. The $5,000 limit can be split between the IRA and the Roth (for example $2,000 goes in the IRA and $3,000 goes to the Roth).

hmmm...i get the feeling i might end up paying some crazy taxes next year. i'll keep researching and figuring it all out.

in any case, if i can only contribute a max of $5000 to both, then what happens if i already have contributed 5000 to each? I did it online in Vanguard and both the IRA and Roth RA have 5,000 in each. As soon as my IRA from Ameriprise rolls over I'll then have 45000 in the IRA.

 

[FIREd]

hmmm...i get the feeling i might end up paying some crazy taxes next year. i'll keep researching and figuring it all out.

in any case, if i can only contribute a max of $5000 to both, then what happens if i already have contributed 5000 to each? I did it online in Vanguard and both the IRA and Roth RA have 5,000 in each. As soon as my IRA from Ameriprise rolls over I'll then have 45000 in the IRA.

You can call Vanguard and tell them you made "excess contributions to an IRA" and they will help you correct the problem. Make sure to take care of it before the end of the year though.

If you pay crazy taxes, you must have made crazy money, so all is not lost I guess...

 

[mickeyd]

When I go to financial dinners and eat heartily at their, I also feel very satisfied. Just feel sorry for those who will get hooked.

I know what you mean, and those who [-]bite[/-] buy also end up paying for the free meal that the rest of us who also ate and then disappeared into the night.

 

[Lisa99]

Your rollover IRA doesn't count against your $5,000 limit in 2010 unless you had already put money into that Ameriprise IRA this year.

And you'll pay taxes on the SPS account proceeds if you had capital gains. Our account was about 4 years old and because of the market drop in 2007/2008 we were still underwater by about $18,000 net on our acct so we didn't have to pay capital gains tax to liquidate.

If your account is still open you can go to the SPS screen online and look at the tab called Gain/Loss (I think that is what it was called). That screen will show you for all the funds you were in whether you were positive or negative in each fund.

 

[harley]

Quiz time: Why are so many annuities sold in IRAs? The answer is NOT to make the advisor rich!

So, why do people do it?

So, what's the answer? I'm curious about from the FA's POV.

 

[willongo]

Cool. I called up Vanguard for advice and got my questions answered and my sanity restored.

Basically, I flipped out because I thought that I would be paying taxes on the entirety of the SPS and VA accounts when cashing them in, not just the gains.

And, because I cannot have more than $25,000 in my bank account (a requirement of a subsidy that I'm receiving) and I already have $20,000 in there I had no idea where to put the extra money from the SPS and VA (about $30000) if I couldn't put it in an IRA.

Vanguard advised me to open up a non-retirement acccount and to use their online funds advisement tool. So, I'll end up dropping the money in some funds that were recommended in a portfolio that included Total Stock Market Index (48%), Total International Stock Index (12%), and Total Bond Market Index funds 40%).

Vanguard is also issuing me a check for the Roth IRA that I had plunked $5000 into since I already plunked another $5000 into the IRA.

I'm sure I'll run into something else that will send me into orbit, but I'm not as panicked now as I was before.

I've been reading Random Walk Down Wall Street and it has been helpful but I obviously need to do much more reading and research to get a grip on sound investment practices. It's fun, though.

 

[Raygun99]

I haven't looked at EVERYONE of your transactions but you may want to get a summary of what your Basis information was in Ameriprise before they close out your accounts. Your TAX return for 2010 will need some level of scrutiny to ensure all of these changes are properly accounted for in sheltered and general accounts. IRS is getting better at making them provide information but some are not very cooperative after your close the accounts.

 

[Lisa99]

you may want to rethink the Total Bonds Fund in your Vanguard taxable account. If you have that fund in a taxable account, you'll have to pay taxes on the monthly dividends it pays even if you reinvest the dividends.

Not sure what your your total investment pot is, but you want to try to keep bonds in tax deferred accounts. We have all of our bonds allocation (40% of total) in our 401k accounts and the Total Stock Market Index and Total Intl Index in the Vanguard taxable acct.

You might want to get familiar with the Bogleheads forum. It's a good financial forum that that helps people with the fundamentals of investing. It's one of the sources I used for self-educating when we took over managing our investments. The FAQ on where each asset class should be placed (taxable account vs tax deferred acct and why) is here: Bogleheads :: View topic - Investment Planning

 

[FinanceDude]

Because it allows you to tax defer the same money twice?

Uh. no..........

 

[FinanceDude]

Cool. I called up Vanguard for advice and got my questions answered and my sanity restored.

VG gave you tav advice? Oh-oh.........

 

[FinanceDude]

So, what's the answer? I'm curious about from the FA's POV.

There's three views here:

1)The insurer's promoting VAs view
2)The firm the FA works for view
3)The FA's view

Where shall I begin?

 

[clifp]

There's three views here:

1)The insurer's promoting VAs view
2)The firm the FA works for view
3)The FA's view

Where shall I begin?

With #1 and work your way to #3 or work backwards it is a sort of free country.

 

[FinanceDude]

With #1 and work your way to #3 or work backwards it is a sort of free country.

The large insurance companies are NOT dummies. They know quite well that VAs represent "sticky money", meaning that due to surrender charges, benefit bases, death benefit riders, etc, folks are not going to disturb that money for a good long time, maybe never in some cases.

I think Pacific Life is a good example, they sponsor seemingly every sports event in the country, their advertising budget has to be in the $10's of millions of dollars. Of course, M&E charges and other expenses pay for that in the end. They know that DB plans (pensions) have gone for most folks the way of the dodo. They also know their distribution channel is everyone in American that holds a Series 6 and insurance license, which is roughly 600,000 advisors, give or take, from you local bank, credit union, P&C insurance agent, and so on, to the FAs, CFPs, etc. In their minds, they offer the "perfect solution" by making "your IRA or portion thereof your own pension plan". The VA market is booming, mainly because of the boomers and the insurers feeding off the fear in investors. Main pitch? "Let's take a portion of your money, and GUARANTEE a stream of INCOME you CAN NOT OUTLIVE,that you can turn on ANYTIME YOU WANT. And, if the market goes up, you can get a PAY RAISE in retirement, who else is offering you that"? Most are written in IRAs because a) it is allowed, and b) that's where most folks have their largest sum of money.

Many layers of wholesalers, support staff, marketing budgets, etc, means there have to be high expenses for everyone to get paid. The insurer typically pay the advisor, insurance agent, bank, etc about 7% of the lump sum put in the product as a commission. This is assuming a 7 year surrender which well over 50% of all VAs are written as. The firm supporting the FA takes their cut, and the FA gets the remainder, and "everyone wins"................

 

[73ss454]

Well, not everyone wins!

 

[FinanceDude]

Well, not everyone wins!

Hence the "wink-wink, nod-nod" emoticon.........

 

[Raygun99]

Is there a 1,2,3 recepie to create your own portfolio that mimicks a VA? Example Term Life Policy, Some Zero Coupon Bonds, Some Bond Funds for cash flow, Some Stocks for growth, and or Dividend Stock fund?

 

[FinanceDude]

Is there a 1,2,3 recepie to create your own portfolio that mimicks a VA? Example Term Life Policy, Some Zero Coupon Bonds, Some Bond Funds for cash flow, Some Stocks for growth, and or Dividend Stock fund?

I think brewer did one on here awhile back...........

 

[harley]

Quiz time: Why are so many annuities sold in IRAs? The answer is NOT to make the advisor rich!

So, why do people do it?

Most are written in IRAs because a) it is allowed, and b) that's where most folks have their largest sum of money.

I guess you could argue that the latter statement is an answer to your question, but I didn't read anything in the full response that shows that the answer is not "to make the advisor rich". Still sounds like a massive scam to me. I'm not saying that there isn't a place in the world for annuities, but they could xertainly be sold, with reasonable profit, in a much less predatory and amoral manner.

 

[JohnGalt]

Hi all. I'm with ameriprise and was shocked to see all the bad press you are giving them. I use them for my Roth IRA. I'm not a skilled person in the stock market, but i know the basics. I'm investing my money in an american fund with a front load of 5.75%, and an expense ratio of .83. Is that terrible? What is different about the funds you are in? My advisor pointed me in this direction because once the 5.75 is paid, the expenses are low..If i wanted to be in a different fund, i'd just tell them so. Why are they the culprits?

 

[JohnGalt]

Oops, i didn't mean to indicate i'm ''with'' ameriprise.. I use them for my fund management is what i meant.

 

[MasterBlaster]

Hi all. I'm with ameriprise and was shocked to see all the bad press you are giving them. I use them for my Roth IRA. I'm not a skilled person in the stock market, but i know the basics. I'm investing my money in an american fund with a front load of 5.75%, and an expense ratio of .83. Is that terrible? What is different about the funds you are in? My advisor pointed me in this direction because once the 5.75 is paid, the expenses are low..If i wanted to be in a different fund, i'd just tell them so. Why are they the culprits?

I wouldn't call an expense ratio of 0.83 low. It's not as high as some of the advisor selected type funds but's it's certainly not low. And does your fund have 12-b1 (advertisng) expenses that you pay ? I would guess yes. And are there hidden trading fees that are kind of outrageous ? I suspect what the answer is for that. But no, You haven't given enough information to say one way or the other if your fund is really costing you or not.

Per the load. We'll the advisor gets paid somehow. Evidently yours gets paid via the load. At least it's disclosed up-front.

 

[JohnGalt]

I guess i'm not sure if you have been dealing with advisors who push you in a bad direction, or if they are not allowing you to invest the money in the way you prefer? I feel as though if i want to put all my roth money in McDonalds stock that they would allow it. Is the company corrupt, or are the advisors just not always advising what we want?

Who should we switch to?

 

[Rustward]

Somebody correct me if I am wrong, but 12b-1 fees are included in the overall expense ratio, so when you see a 12b-1 fee in a prospectus, that is telling you how much of the total ER is 12b-1.

Still it is best to avoid 12b-1 fees.

 

[Lisa99]

Hi John,

You might want to start your own thread regarding your Ameriprise questions.

Each person is different and if we start answering your questions in this thread it might get confusing.

I, for one, left Ameriprise less than six weeks ago. There were myriad reasons including being sold a VUL that was totally unnecessary. Another reason is that our advisor was not looking at our total portfolio as a whole. He was advising us within the Ameriprise acct as if it were the only money we had invested even though he knew it wasn't...and the list goes on.

There are a number of us on this forum who have left Ameriprise in order to self-manage our portfolios.

 

[MasterBlaster]

John Galt:

The Company isn't corrupt, They, just like many in the Finacial Services Industry, charge [-]through the nose[/-] high prices for their services and hide the fees in tricky spots. Buyer Beware.

As always the interest of the client (you) and the interest of the financial advisor and financial firm may be contary to each other.

Where to invest ? That's for you to decide.

Have you checked out Vanguard ? I like them because they are owned by the underlying funds. So you as an investor in their funds, in a way own the company. They tend to have very low fees and no loads on the funds.