Seeking advise on New Annuity investments

[rhurhurun]

Dear All
I have been following this forum for sometime and appreciate all the inputs shared here on a wide variety of financial topics. We (My wife and me) are at a point of moving/exiting about ~200,000 from a host of medium performing non retirement annuities (Black rock, Franklin Templeton). We are looking at the following options to invest our ~200,000 and would appreciate any quick feedback or pointers on the same as well as any pointers on how to evaluate the same.

Annuity – American General Life

• Option 1 – S&P 500: 100% total annual growth upto current cap of 5%-10 year surrender
• Option 2- ML(Merrill Lynch) Strategic balanced index -80% of annual return.-10 year surrender

Annuity – Lincoln National Life

• Option 1 – Fidelity Aim dividend participation index= 100% annual return – 10 year surrender

Annuity - Delaware Life (7 year surrender)

• Option 1 – S&P500- annual performance trigger - 4% return is triggered if any increase in S&P500 during the policy year.
• Option 2 – s&P500 – 100% of total annual growth upto current cap of 5%
• Option 3 – Morgan Stanley Global opportunity index – 90% of annual return.

Appreciate all your help and wishing you all a happy holiday period, Happy Christmas and New Year.
Best regards

 

[Sunset]

OP - I'm wondering why are you only considering annuities ?

 

[rhurhurun]

Thanks for your quick response. These Annuities were suggested by our investment consultant. we are open to other non retirement options /suggestions as well. Please advise.

 

[REWahoo]

Thanks for your quick response. These Annuities were suggested by our investment consultant. we are open to other non retirement options /suggestions as well. Please advise.

Take a hint from your user name for great advice on these annuities - run.

 

[pb4uski]

Dear All
I have been following this forum for sometime and appreciate all the inputs shared here on a wide variety of financial topics. We (My wife and me) are at a point of moving/exiting about ~200,000 from a host of medium performing non retirement annuities (Black rock, Franklin Templeton). We are looking at the following options to invest our ~200,000 and would appreciate any quick feedback or pointers on the same as well as any pointers on how to evaluate the same.

Annuity – American General Life

• Option 1 – S&P 500: 100% total annual growth upto current cap of 5%-10 year surrender
• Option 2- ML(Merrill Lynch) Strategic balanced index -80% of annual return.-10 year surrender

Annuity – Lincoln National Life

• Option 1 – Fidelity Aim dividend participation index= 100% annual return – 10 year surrender

Annuity - Delaware Life (7 year surrender)

• Option 1 – S&P500- annual performance trigger - 4% return is triggered if any increase in S&P500 during the policy year.
• Option 2 – s&P500 – 100% of total annual growth upto current cap of 5%
• Option 3 – Morgan Stanley Global opportunity index – 90% of annual return.

Appreciate all your help and wishing you all a happy holiday period, Happy Christmas and New Year.
Best regards

Best advice.... NONE or the above.

But need more info on your ages, investment objectives, how close to retirement, risk appetite, etc... but annuities are rarely a good answer.

 

[Castaspey]

One of my financial rules is to never invest in an instrument I cannot fully understand. The primary reason is that my counterparty (whoever is selling it to me) probably does understand it completely because they wrote the contract and is using that differential understanding to their advantage. That is why I buy term insurance (which I can understand) and also invest my money, but I don't buy whole life policies which blend the two together in ways that I cannot fully math out.



These complicated "mirror the market, sort of" annuities are complicated and written to benefit the seller, not you.



In other words, not a fan. I would also be asking if my investment counselor received compensation that might be influencing this advice.

 

[OldShooter]

Advise? Find a new FA.

 

[Sunset]

OP - Most of the time some advisor or bank employee or other sales position is trying to sell an annuity because it pays them a really nice fee. The language is complex and by the time you figure it out it's too late and you lost a bunch of money, by not making a ton of money.

I am no annuity expert, but I have seen a few, and they were all bad and sold inappropriately so the salesman could make a big fee, even if he was a FA.

For example I've seen a $100K annuity over 10 years full of promises of great sounding returns, in the last 10 years (where the stock market has been a blessing) earn a total of 1% per year. Yes, the owner of that annuity now has $110K The owner would have made a LOT more $$$$ just putting the cash into CD's or an online savings account.

You need to frame the question in terms of your total savings.
Importantly, please post more details like age and other assets like IRA/ROTH/taxable brokerage account amounts. You don't even have to say where or exactly how much. Then you will get a lot of good advice.

 

[DrRoy]

Best advice.... NONE of the above.

Advice? Find a new FA.

OP - Most of the time some advisor or bank employee or other sales position is trying to sell an annuity because it pays them a really nice fee.

+1

 

[Red Badger]

OP.

In some cases, an SPIA might make sense. However, in times of near record low interest, any annuity will come at a very dear price. Like others have already stated, if you don't understand it, why would you invest in it?

 

[target2019]

Dear All
I have been following this forum for sometime and appreciate all the inputs shared here on a wide variety of financial topics. We (My wife and me) are at a point of moving/exiting about ~200,000 from a host of medium performing non retirement annuities (Black rock, Franklin Templeton). We are looking at the following options to invest our ~200,000 and would appreciate any quick feedback or pointers on the same as well as any pointers on how to evaluate the same.

Thanks for your quick response. These Annuities were suggested by our investment consultant. we are open to other non retirement options /suggestions as well. Please advise.

The inescapable conclusion is that your investment consultant has you in a bad situation for 200K (and it is a good situation for him, at what fee percentage?). Now he/she wants to put you into a bad (for you) annuity situation that earns the investment consultant an extra bonus, at your expense.

The analysis of your situation requires time and thought. It's best you analyze your entire financial situation. There are many recommended books, or you can look on the internet for articles and knowledge.

Hope you find a way to move away from the entire investment consultant situation.

 

[racy]

OP,
You can learn to do your own investing without the cost of a financial advisor. Here's a good place to start. It's a few short videos for a quick, easy-to-understand introduction: https://www.bogleheads.org/wiki/Video:Bogleheads®_investment_philosophy

 

[brewer12345]

Run. Almost anything would be better than the various piles of fertilizer you are being sold. If I caught an advisor selling this stuff to a relative I would be looking to file an ethics or sales practices complaint or lawsuit.

 

[CRLLS]

My limited experience is that the FA , investment consultant or, or whoever is pushing these complex investments do not really understand them either. Next year they may say "Sell it, there are now investment opportunities to make more money" (for them).

Best advice is as already mentioned, if you don't understand it, just figure that somehow, someone else is taking some of your money. Stay away. Far away.

 

[Clone]

I understand why the salesman might be pushing the American General Life annuity- it looks like he gets a 7% (minimum) commission on that sale!

 

[travelover]

I understand why the salesman might be pushing the American General Life annuity- it looks like he gets a 7% (minimum) commission on that sale!

That's only $14,000. Surely an advisor would not steer you wrong for so little.

 

[rodi]

Annuities are expensive investments... Not huge rewards, but huge fees/commissions/costs.

Ask your FA the following questions:

- Do you make a commission on these annuities?
- How much as a percentage of initial investment?
- What is the annual cost/fee for the annuities - is that taken out of the 'earnings' or out of the principal.
- What is the cost of getting out at 1 year, 5 years, etc... Will I need to pay a penalty to transfer out of the annuity?

 

[ERD50]

Annuities are expensive investments... Not huge rewards, but huge fees/commissions/costs.

Ask your FA the following questions:

- Do you make a commission on these annuities?
- How much as a percentage of initial investment?
- What is the annual cost/fee for the annuities - is that taken out of the 'earnings' or out of the principal.
- What is the cost of getting out at 1 year, 5 years, etc... Will I need to pay a penalty to transfer out of the annuity?

I totally disagree with bringing these questions to the person trying to sell you these products. If you are going to ask these questions, ask them of an independent 3rd party.

But I wouldn't waste my time on either. It's pretty easy to see this sales person is not putting your interests first, and will likely have a bunch of convoluted 'answers' for you, so just run. Run.

It's unlikely that an annuity is the best choice for you. Look at a simple 2-3 fund portfolio and be done with it. If you share your big-picture, people here will guide you through it.

-ERD50

 

[SumDay]

Annuities are a great deal, for the person selling them.

DH was offered a pension buyout about 10 years ago, and we began interviewing financial advisers. Several suggested annuities, and I came to this board for advice. Luckily I listened and we took the lump sum and rolled it into his 401(k). Later we rolled the 401(k) to an self-directed IRA at Vanguard. I learned a lot from this board and Bogleheads, and am now my own financial and investment adviser. We can go on a nice trip each year with the $$$ I save not paying someone to do this for us.

You've received some great advice here - these folks know what they're talking about. Good luck to you and let us know what you decide to do (if you want).

 

[OldShooter]

Annuities are expensive investments... Not huge rewards, but huge fees/commissions/costs.

Ask your FA the following questions:

- Do you make a commission on these annuities?
- How much as a percentage of initial investment?
- What is the annual cost/fee for the annuities - is that taken out of the 'earnings' or out of the principal.
- What is the cost of getting out at 1 year, 5 years, etc... Will I need to pay a penalty to transfer out of the annuity?

I really disagree with this advice, well meaning though it is. Here's why:

It is clear that you should no longer consider doing any business with this FA. It is also likely that this FA has had very good sales training and will have ready counterarguments to your issues. It is also possible that this is a person you consider to be a friend, a colleague, a fellow church member, or even a family member.

The result is that any conversation with this FA has the potential to become confrontational or, worse, that you will be badgered into submission and buy some of this crap. Best case? There is no best case. The FA is not going to transmute into Mother Teresa.

So just ghost him. Don't initiate or return phone calls. None. Zero. Screen with caller ID, spam block, delete voicemails without listening... If the FA does somehow make contact, say this: "I have decided to take my investments in a different direction." Say it over and over for as long as necessary, even if your teeth bleed.

Take your business to Schwab, Fido, or Vanguard. If you currently have assets with this current FA, fill out one of the new company's asset transfer forms. They will take care of getting the assets moved. There is no need for you to have any further contact. No need for explanations. No need for apologies. You're just gone.

Start over. In addition to non-commissioned advisors like at the three houses mentioned there is a wealth of good information out there. I recommend "The Coffee House Investor" by Bill Schultheis as a good place to start. bogleheads.org, already mentioned, is another excellent resource. "The Bogleheads' Guide to Investing" by Taylor Larimore is a good first dip into the bogleheads' pond -- which can be a little intimidating.

Oh, and tape this pledge to the top edge of your monitor: "I will never make an investment that I do not completely understand."

 

[Spock]

Annuity threads at some point usually come around to "annuities are fine for those unable to manage their savings themselves and willing to pay somebody to manage their money for them". Some people can't manage money. No shame in that.
But I would suggest hiring a fiduciary to manage money in investments that you can look up in a newspaper vs. an annuity. No surrender charges. No lock-in with some company you never heard of. etc.



My Dad bought an annuity 10 years ago... as a rollover IRA... BUT it was never "annuitized" so that there was never a promise of income for life... just standard RMDs sucking his balance down while it earned a whopping 0.69% in completely undecipherable funds that couldn't be mapped to any other real world asset for performance comparison.
And... The well known global company with a long history he bought it from just sold off its annuity customers to a private equity company that was founded in 2018.

One exercise: Take your initial annuity purchase price and divide it by your annual income guarantee... thats how many years your annuity is giving you your own money back. Odds are that just about reaches your life expectancy.

 

[jazz4cash]

I’ve seen many folks come here and say they’re ditching an annuity. This is maybe the first time I recall a poster wanting to get back into another annuity product.
Not sure if it’s been addressed but does a surrender charge apply to getting out of the current host of annuity products ?

 

[pb4uski]

One thing to be aware of... a case could be made that the products like what the OP wrote about are annuities in name only... the basic nature of those products are complex investment products with high fees and charges... then in order to make them tax-deferred an annuitization option is added... an option that is rarely invoked but does sneak the product under the tax-deferral bar.

 

[CRLLS]

Do I read the OP's post correctly? Some of those returns are capped at 5%? SP500 has gained 27% YTD as of today. Wouldn't that mean you are ~ 22% down from what an SP500 fund would be this year! Another of the annuities returns only 80% of the market gains leaving about 5% of this years possible gains on the table.

 

[REWahoo]

Do I read the OP's post correctly? Some of those returns are capped at 5%? SP500 has gained 27% YTD as of today. Wouldn't that mean you are ~ 22% down from what an SP500 fund would be this year! Another of the annuities returns only 80% of the market gains leaving about 5% of this years possible gains on the table.

Imagine what other fun facts are buried in the fine print. The last non-SPIA annuity contract I reviewed was 75+ pages long and full of goodies (most for the insurer and sales folks, not the purchaser).