Mutual Funds vs Annuity

[street]

Mutaul Funds vs Annuity >>>> a few days ago I had to go see an agent with Thrivent about a Life Insurance Policy we have. Any way I have had some money with them for many years some in an Annuity and some in Mutual Funds.

While I was there he visited with me about taking the money out of Mutual Funds and putting it all into the Annuity. He said one of the reasons being is what I put in the Annuity I would never ever go below that amount no matter what the stock market does. Example if I have 300K at anniversary date that amount would always be 300K even if at time of surrender it was worth less.

I want your opinion on this move he has talked to me about and or questions I need to ask?

The one thing I want to say is I may never have to use these funds in my life time so take this inconsideration.

 

[Texas Proud]

You will find out that most here view it this way....


Annuity = Bad

 

[sengsational]

I agree with whatever PB4uski will say

 

[street]

That is what I thought. This Annuity I have had for many years and it has done well in gains through the years.

What would be an options for me to take what I have in that Annuity and do something different with it. Remember I may not need to use this money so what would you do?

Thanks

 

[MRG]

Annuity, what kind, from who?

 

[flintnational]

You will find out that most here view it this way....


Annuity = Bad

It depends on the perspective. The annuity salesman sees it this way.

Annuity = Good Commission

 

[capjak]

Need much more info to make an assessment. Need specifics of annuity. What type etc....

 

[JoeWras]

Mutaul Funds vs Annuity >>>> a few days ago I had to go see an agent with Thrivent about a Life Insurance Policy we have. Any way I have had some money with them for many years some in an Annuity and some in Mutual Funds.

In my opinion, Thrivent has veered a bit too much to annuities and life insurance.

Thrivent has the faith basis, but it is important to understand that their FAs are paid just like any other FA. Your FA will make a large commission based on that annuity purchase. They are not volunteers. They are humans trying to make a living on those commissions.

Thrivent Choice is great an all, but I prefer to save my commissions and fund fees and directly contribute to the charities of my choice.

YMMV.

 

[MRG]

In my opinion, Thrivent has veered a bit too much to annuities and life insurance.

Thrivent has the faith basis, but it is important to understand that their FAs are paid just like any other FA. Your FA will make a large commission based on that annuity purchase. They are not volunteers. They are humans trying to make a living on those commissions.

Thrivent Choice is great an all, but I prefer to save my commissions and fund fees and directly contribute to the charities of my choice.

YMMV.

+1

They were two different companies untill 2001? One more focused on insurance, the other funds.

My guess is the insurance markets more lucrative at this time. Yes would be careful about fees.

 

[gayl]

Not necessary to take

I may never have to use these funds in my life time so take this inconsideration

If you have a habit of blowing thru $$s and need someone to cap your increases / limit access to your funds / put you on an 'allowance,' then an annuity could make sense. Otherwise run, don't walk, away from the salesman

 

[street]

I understand and I have learned through the years it was not a great financial decision but was done years ago. My purpose was for it to help fund my income in retirement years.

As far as what kind of Annuity. I can tell you a few things that I have asked him about it. He said there would be NO RMD on this Annuity. He also told me that what I have put into the Annuity it would never go lower. So if 300K is what I put in it never goes less. The other thing is if on my anniversary date if it is 400K then it will never go below that number as a payout amount. That is all I real know about it.

How hard would it be to get out of an annuity? I suppose it would cost me a lot of money to push those funds to my mutual funds with the same company?

 

[JoeWras]

I understand and I have learned through the years it was not a great financial decision but was done years ago. My purpose was for it to help fund my income in retirement years.

As far as what kind of Annuity. I can tell you a few things that I have asked him about it. He said there would be NO RMD on this Annuity. He also told me that what I have put into the Annuity it would never go lower. So if 300K is what I put in it never goes less. The other thing is if on my anniversary date if it is 400K then it will never go below that number as a payout amount. That is all I real know about it.

How hard would it be to get out of an annuity? I suppose it would cost me a lot of money to push those funds to my mutual funds with the same company?

I'm less concerned with your older annuity. "Getting out" is usually difficult, with fees and penalties. Maybe you can let that ride and it will be a leg of your future income stool.

I'm more concerned with the new money he wants to put you into an annuity. For some people, annuities work for the reasons you mention, and he emphasized. But why more now?

Your original question seemed to be about new money into another annuity. Why? Ask to take a breather and do your research. Thrivent's mutual funds are so-so. The old Lutheran Brotherhood funds were a disaster. I think they've gotten better, although their fees are in the 0.60-0.90 range. But at least they are a choice away from annuities.

Regardless of "never lose money" talk and all, don't put all your eggs in one basket.

 

[flintnational]

I understand and I have learned through the years it was not a great financial decision but was done years ago. My purpose was for it to help fund my income in retirement years.

As far as what kind of Annuity. I can tell you a few things that I have asked him about it. He said there would be NO RMD on this Annuity. He also told me that what I have put into the Annuity it would never go lower. So if 300K is what I put in it never goes less. The other thing is if on my anniversary date if it is 400K then it will never go below that number as a payout amount. That is all I real know about it.

How hard would it be to get out of an annuity? I suppose it would cost me a lot of money to push those funds to my mutual funds with the same company?

Street, IMO, the mutual fund option also raises concerns. I reviewed Thrivent's website. The mutual fund class A shares I looked at (did not look at all funds) carry a 4.5% front load and a 1% back load. They have the same funds without a load. But if you are working through a representative, you would likely pay the loads. IMO, you should either 1) educate yourself on the annuity and funds at Thrivent and compare them to low cost options (Vanguard, Fidelity or Schwab) without sales loads or 2) engage a fee based financial adviser (preferably a fiduciary) to advise you or 3) provide the names and details of the annuities and funds for the folks here to analyze.

FN

 

[OldShooter]

... questions I need to ask? ...

Very simple:

"Are you acting as a fiduciary in recommending this transaction? In our entire relationship?"

The likely answer is "No," followed by a bunch of arm waving and BS.

Assuming "No" your next line is: "Goodbye"

If the unlikely "Yes" then obtain similar annuity prospectuses from Vanguard, Schwab, and Fidelity. Ask him to give you a comparison chart of the four, including all fees.

If you can get PDFs of annuity prospectuses (prospecti?) you can amuse yourself by doing text searches for the word "fee." I looked at one for fun and found surrender fees (of course), annual fees, annual administrative fees, fees to put money in, fees to take money out, ... It was amazing.

If this is one of those S&P index type deals or any other index-based scheme, be very careful to make sure the calculations are based on the total return of the index (including interest and dividends) and not just on the nominal index values that you read in the news. Interest & dividends can increase an index's total return by 4% or more. Typically the annuity vendors simply ignore that and pay you only based on nominal index values, effectively keeping the rest for themselves.

In this day and age there is absolutely no reason to do any business with an FA who is not legally a fiduciary for the entire relationship, not just for retirement funds as the DOL rule requires.

 

[Texas Proud]

I understand and I have learned through the years it was not a great financial decision but was done years ago. My purpose was for it to help fund my income in retirement years.

As far as what kind of Annuity. I can tell you a few things that I have asked him about it. He said there would be NO RMD on this Annuity. He also told me that what I have put into the Annuity it would never go lower. So if 300K is what I put in it never goes less. The other thing is if on my anniversary date if it is 400K then it will never go below that number as a payout amount. That is all I real know about it.

How hard would it be to get out of an annuity? I suppose it would cost me a lot of money to push those funds to my mutual funds with the same company?

How old are you?

Why is this 'never lose money' a concern?


The usual way someone can guarantee you never lose money is that they take a good amount when you should be making money.... so, say we both put $100K in an investment 10 years ago... you now have $500K and I have $1 million.... but the next year the market goes down 20%... sure, you still have $500K but I have $800K..... who is better off

Look at history.... the market usually recovers all its losses in a few years.... not always but most of the time...

And if you never need the money, then who cares if you have a year or two of being down?

I just do not see any good reason to do an annuity....


BTW, my mother did an annuity back in the 80s.... it was not tied to the stock market, but interest rates... if she had invested in MFs she would have a few million more dollars today then she does... that would not affect her at all, but all of us kids would be making out much better....

 

[street]

Thank you all for the information and lessons learned. I will look more into what I need to do or if I want to do anything.

flintnational >>>> I will check on the loads but I believe I don't pay that any more. I had so many years that I had to pay them but I have reached that limit years ago.

Thank you all not a good thing to hear but it is what it is. In my early years of investing I did the best I could and tried to go with a company I trusted etc. not that my decisions were good.

 

[flintnational]

Street, most of us have made investing mistakes. Mine involved real estate and 5 zeros. I just try not to make the same mistakes.

I mentioned the mutual funds since you stated you might roll the annuity money into the existing mutual funds. Normally they will charge the loads on any new money coming into the fund. Even if it is an existing account.

FN

 

[street]

Thanks and I will check on that and few other questions about the accounts. I only good thing is I did save and it isn't like it isn't worth anything. The other thing is I have enough and what I have in that annuity won't break me one way or another. I still have what I had and won't loose that. The amount is a lower 6 digit.

 

[MRG]

OP,

I don't know much about annuities but recently my new Fidelity rep has been pushing me to add an SPIA. My understanding is that's the only type to purchase. That said I'm leary, very leary. Why? Not just poster's here who know more than me.

My DF worked for Met and sold the things. We never talked much about investing till long after he retired and it was mainly about funds.

I recall asking about annuities once and he told me to stay away. His point was the right ones might be OK for some people, not me! I asked who might benefit from one and he quickly blurted out his brother and my sister. He didn't consider either to be particularly intelligent or financially competent.

I've been chewing on the old man's advice for years. One hand my old man wasn't too smart himself, on the other he was a very honest man who actually thought suitability ment something.

I'd be very cautious about any annuity.

ETA: Google mutual fund fees and look to investopedia. There's good info on how FAs are comped. You'll need to know the fund class(A,C..) and you'll understand more.

 

[mickeyd]

I want your opinion on this move he has talked to me about and or questions I need to ask?

Run away! Run away!

 

[JoeWras]

I recall asking about annuities once and he told me to stay away. His point was the right ones might be OK for some people, not me! I asked who might benefit from one and he quickly blurted out his brother and my sister. He didn't consider either to be particularly intelligent or financially competent.

I think the idea here is if you have someone who is a bit sketchy with money, and may burn it all, annuitizing it might help them control their urge and give them monthly income instead of a load at once.

Then comes along companies like JG Wentworth (see your local TV late night ad, "Get Cash Now!") and they will buy out your annuity and pay you up front.

 

[street]

Here is what my most current info states on this Annuity.

Variable Annuity
Non Pension Annuity
Min Guarantee Interest 3.50%
Cash/Accumulated Value $213,006.12
Surrender Charge $0.00
Cash Surrender Value $213, 006.12
Cost basis $160,000.00
Taxable Gain $53,006.12

 

[MarieIG]

Hi Street, what I don't see are the costs associated with the annuity. I suggest you look for those.

Also, be very leery of just getting a check for the surrender value and getting hit with the tax. Depending a 1035 exchange may be something you may want to consider.

 

[Z3Dreamer]

OP, I have an annuity that represents about 5% of my portfolio. Had it 23 years. Big fees are paid up front. No surrender fees at this point. You probably have none either. You do not state what investments back up the annuity. In my case, I can pick from a whole bunch of mutual funds. I bet you can, too.

You are in the accumulation phase of the annuity. At some point, you can switch to the payout phase. At that point, you can decide to take it out over various periods (joint life, 5 years certain, single life, etc.). You can also take it out, all at once. I would NOT annuitize the account as it represents another chance for the insurance company to make money off of you.

Unless the funds are really terrible, I would leave the money where it is as you will have to pay ordinary income taxes on that $53,006.12 if you pull it out all at once. My annuity requires that I begin distributions at 95 or so.

I would NOT add money to the annuity.

 

[street]

I thank you folks for taking a look and giving advise. To answer a few more questions that was asked.

As for what it costs me I don't know for sure but will check.
The funds of choice I have are Large Cap Growth, Large Cap Stock, Large Cap Value, Pntr Growth Small Cap Index are some I have invested in.

I will ask again about RMD he told me I don't have that with this Annuity but will clarify that.