First of all, this is my first time posting, although I've been actively reading this site for a good 2-3 years. Thanks to all of you who provide such great analysis and posts. While I've been a "silent participant," its great having a forum such as this to enjoy a shared passion of living beneath one's means, and focusing on a FIRE lifestyle.
Anyway, this first post isn't about me, but rather my parents. I will try to give as much detail and if there are blanks, please let me know.
My parents work with an independent financial advisor who I believe is doing a pretty good job with their money. I actually met her for the first time last night as my parents want her to get to know my sister and me just to build a better working family relationship.
My parents recently sold some investment farm land in which they are netting about $300K. This brings their overall portfolio to about $1MM (a combination of 401K, IRAs, a balanced portfolio of American Funds, and stock in Exxon and Center Point Energy). Right now this $300K is sitting in a short term CD earning a modest 2.5% awaiting distribution.
The advisor is recommending they put the $300K into a joint annuity Shareholders Advantage Variable Annuity through Lincoln Financial, with the funds invested in American Funds. The advisor says that there is a 2% upfront fee and she gets a standard 1% of the portfolio. She claims that this annuity has a guarantee payout of 5% per year, and that if one of my parents were to die, the other keeps moving forward with the same terms, and if both my parents were to die, we (my sister and I - their heirs) would receive the current value of the sum (whatever the $300K has turned in to). If the fund returns more than 5% a year, they'd get the additional sum as well, but are guaranteed 5%.
My Dad is 61 and my Mom is 57 - and both hope to work 5 more years.
In doing some retirement forecast, my parents believe they may need some of the guarantee to maintain their current lifestyle, so they expect to need to draw upon some of this. My questions are as follows:
- Does this annuity and its terms as I laid them out make sense?
- Is it more advantageous to take this $300K, dollar cost average in to the market over the next 12-16 months in a diversified and risk appropriate portfolio?
- What am I missing?
Thanks so much for any insight.
Anyway, this first post isn't about me, but rather my parents. I will try to give as much detail and if there are blanks, please let me know.
My parents work with an independent financial advisor who I believe is doing a pretty good job with their money. I actually met her for the first time last night as my parents want her to get to know my sister and me just to build a better working family relationship.
My parents recently sold some investment farm land in which they are netting about $300K. This brings their overall portfolio to about $1MM (a combination of 401K, IRAs, a balanced portfolio of American Funds, and stock in Exxon and Center Point Energy). Right now this $300K is sitting in a short term CD earning a modest 2.5% awaiting distribution.
The advisor is recommending they put the $300K into a joint annuity Shareholders Advantage Variable Annuity through Lincoln Financial, with the funds invested in American Funds. The advisor says that there is a 2% upfront fee and she gets a standard 1% of the portfolio. She claims that this annuity has a guarantee payout of 5% per year, and that if one of my parents were to die, the other keeps moving forward with the same terms, and if both my parents were to die, we (my sister and I - their heirs) would receive the current value of the sum (whatever the $300K has turned in to). If the fund returns more than 5% a year, they'd get the additional sum as well, but are guaranteed 5%.
My Dad is 61 and my Mom is 57 - and both hope to work 5 more years.
In doing some retirement forecast, my parents believe they may need some of the guarantee to maintain their current lifestyle, so they expect to need to draw upon some of this. My questions are as follows:
- Does this annuity and its terms as I laid them out make sense?
- Is it more advantageous to take this $300K, dollar cost average in to the market over the next 12-16 months in a diversified and risk appropriate portfolio?
- What am I missing?
Thanks so much for any insight.