annuities versus funds or stocks?

Question

Myself: I invest in a diversfied manner..
Ie; mostly funds, sone annuities (always high yeild), some stocks.

Mother:
My mom is almost totally cd's or annuities.

While I agree a portion should be annuity or bonds, I think doing 100% is stupid...

Any opinions.
My goal in this question is that I want to get her off my back in terms of 'why invest the way I am doing?'

To me the socalled safe way is not cost effective in that I consistantly get 3-6 times in % rate over what she gets.

It appears that all of this isnt enough, and I figure no amt of discussion is go change it.
I relize fdic is not involved on annuities or cd's in all cases.
Ie; just because its a bank doesnt mean the investment is covered by FDIC. (FDIC covers deposits not invesments).

Mother is 89 so I have no problem with her methods, but she has been doing annuity or cd' for 45 years.

Any ideas? - figured I would throw this question out there.

Ultimately this is a 'annuity versus funds/stocks' question?

Answer 1

It really depends on your goals, financial situation and age. The older someone is (like your mom), the more conservative you want to be. However, for someone younger, you need to plan to stay ahead of inflation in retirement and many fixed or indexed annuities will not allow you to do that if that is all you have in your portfolio. Having a good mix is key. Many financial planners suggest subtracting your age from 100 and then using that number to decide what percentage of your portfolio should be made up with stocks/mutual funds. Tell your mom that while she is probably very happy with the way she has invested, you have a different strategy for maximizing growth and staying ahead of inflation.

One side note - there are some variable annuities that can get you the type of return you like. So, once again, it just depends on what you choose. Hope this helps!

Answer 2

Your mother is 89. Is she single? Are their any heirs that may fight over her money? At 89 she really should only have about 10% of her money in the stock market or mutual funds. She is not concerned about building wealth, but preserving it. The more money she has in annuities (FIXED) the better if she is single. Annuities and Life Insurance avoid probate. I deal strictly with seniors and their concern is that an attorney will make a killing on the money they worked so hard for because it automatically goes through probate. She has been smart with the safety of her money. Leave it as is. You will be thankful when she passes away that she did the annuities I promise you. All of my clients' children had no idea why their parents did the annuities with me until I explain that they will each have a check 7 - 10 business days after their parent passed away. Good job mom, and you for checking up on her.

Answer 3

annuities traditionally carry stiff expenses....
you can get essentially the same return out of many bond funds and/or Growth & Income funds
...you pay heavily for the insurance aspect of an annuity.

mutual funds often mirror the market. or a sector
it is ususally cheaper to buy an ETF that does the same thing, since most ETFs have cheaper operating expenses...

I can understand her safe, secure approach; however, there is very limited growth with CDs and annuitites...they seldom pay more that a couple of points [at best] above inflation..

if you wanted to present a viable fiscal reason for her to diversify some of her holdings...I would show her the net gain after inflation...

Answer 4

the major benefit of annuites is the tax deferment. there is an coverage corporation at the different end of the annuity taking it decrease and there is a mutual fund in which the annuities are invested also taking its decrease. mostly you may get carry of most of the deferment with the help of making an investment in a good decision of index money. Mutual money regrettably do not in various of situations provide tax deferment by way of requirement of getting to distribute realized capital constructive factors. Index money ought to not mostly be dispensing too many capital constructive factors yet they are going to be dispensing earned dividends.

Answer 5

Well, at any age... i would never be 100% annuity or cd. especially if they are 1% like hers was.
If its not a high rate.. it will either be nothing or stocks...
Im now 57 compared to when that question was originally asked...
Her sons (3) inherited everything.

Answer 6

I have the same situation. My mom is 90 now and got cd's sold to her through a brokerage along with annuities. They all suck, between loads and market risk not there with a straight bank cd. I'm assuming you have POA. If not you just have to convince her and should suggest the POA on general principle. You might consider EFT's being liquid and better yields than those annuities. Energy trust funds is another area but Canada just changed their tax structure on theirs.