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Pension and SS $52K yearly, no debts. Savings, cd's mutual funds, IRA's --Total $365K. We own our own home, have long-term care and a HMO.

2007-03-07 08:50:13 · 4 answers · asked by Butler 1 in Business & Finance Investing

4 answers

Annuities are great for the person who sells them but not for the person who invests in them. The fees are usually 8%, which in your case will be 29k. You are much better off with income producing investments. Find a good broker who can set you up in a mix of dividend paying stocks and some bonds to generate income. One more thing, annuity salesman are very slick and the fees are often hidden, so be careful.

2007-03-07 08:58:09 · answer #1 · answered by Anonymous · 0 0

Let's take a hypothetical scenario. I'll take $250,000 of your $365,000 and put it into an account that has earned an average annual 10.27% interest over the last ten years. Oh, and by the way, you CANNOT lose a single penny of your investment, no matter what. Oh, and just for playing, I'm going to write a check for $25,000 and add it to your account the moment you open it.

The downside is that you can never take all of the money out at once without penalty. After the first anniversary, you can take up to 10% of your account value each year, or you can produce a regular income from ten years to the rest of your life (and if that life is shortened, the balance goes to your heirs). If you choose any one of several life income options, I'll guarantee you that you will never outlive that income.

I just described the equity indexed annuity I recently recommended to my father, age 74.

Annuities come in more types and variations than anyone can fathom. Most of the statements made in the above posts are generally correct, but don't apply to the reasons folks buy annuities.

Every financial vehicle, without exception, is the very best solution for someone. If it exists, it will perform for a particular individual in a particular circumstance better than anything else will.

I'm a planner. I don't sell annuities, and I don't collect those allegedly obscene commissions everyone mouths off about. I do, however, recommend annuities quite often, because they are often in the best interest of my client.

Is this VA a good idea? I don't know. I don't know you. Talk to a qualified advisor who does, and stop listening to strangers who aren't capable of understanding that there are more variables to a decision than sheer performance.

2007-03-07 19:35:19 · answer #2 · answered by Rob D 5 · 0 1

I am not a real great believer in annuities. Their basic selling point is tax deferment. You all are in the 15% bracket, so you will not be deferring a lot.

I have not quite reached that age bracket yet, but I am closing in very rapidly.

I believe what I would do would invest in somewhat conservative income--capital appreciation funds such as for example FEQIX or a similar fund. Actually, since you already own mutual funds, I think you probably get my meaning here. Now it is really important to maintain good diversity. So a few other type mutual funds would also be added to the mix, such as an international stock fund that invests in large foreign companies. Keep in mind also that dividend income is taxed at a very favorable 5% in your case. So more dividend income means more money in your pocket. There are some pretty decent index funds with very low expense ratios that would suit you to a T.

PID International dividend paying companies 3.65% current dividend.

IVE domestic value fund 2.3% current dividend

Even SPY the S&P 500 index fund. 2.27% current dividend.


Keep in mind also that variable annuities lock you in. Not a real good position to be in if you should need some money.

2007-03-07 17:35:06 · answer #3 · answered by Anonymous · 0 0

Always look at the penalties. The most common penalty at your age is when you can claim your money without penalty. Chances are you will see that you need to wait 30 years before you can withdrawl the money without penalty. You obviously do not want to wait till you are over 100 years old before you get your money back without penalty.

Another "scam" you want to look at is people offering high interest CDs. The bait and switch is that you will be offered an annuity (with the wait 30 years penalty) instead. I think you will be much happier with I-bonds and TIPS. Both are government bonds that are insured and adjust to inflation. If you need the money back that week, you will get it.

2007-03-07 17:21:40 · answer #4 · answered by gregory_dittman 7 · 0 1

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