I'm not talking about the whole life or annuity investments while still working, but putting a lump sum into an annuity that provides a base level of income for you (and spouse) for life. Obviously, the insurance/investment company is able to make money with higher risk investments than a retiree would make for themselves and they are hoping you die young.

No - I've never found them to be a good investment choice for myself.

My IRA has an annuity in it, along with some REITs and mutual funds.

I'm interested in this topic as I'm currently hearing a pitch from a financial advisor selling annuities.

The principle of having a 3 to 6% baseline annuity sounds good. I'm collecting my questions for him when I see him again this Friday. I do remember one point that having an annuity inside an IRA misses the point as the annuity is supposed to be tax-free but when you take it out of the IRA, then it's taxed. He is proposing I put some of my IRA money into an annuity.

I don't have any hard stance at this point as I'm exploring my options.

Fixed annuities are terrible investments, unless you have joint survivor benefits and one of you lives to 100. Do the math. Get several opinions.

PS Annuities pay HUGE commissions. Pay for a fee-only CFP to evaluate the offer. Might be the best 500 bucks you ever spend.

If you do buy an annuity, ask if the agent is a fiduciary. If not, don't buy it. Get everything, and I mean everything, in writing. Ask about the complete fee breakdown. He is a salesman.

Ask him if he will meet with you along with your fee-only CFP.

This is your retirement. Don't make a hasty decision. There is a good reason that insurance companies are so profitable.

If you buy a single life policy, evaluate your family health history. Joint life is the way to go, IMO. Get several opinions! You can not un-do this decision.

If the agent is putting ANY kind of pressure to make the decision, fire him.

Bad investment. My parents had one with GE and made about 1.7 percent IRCC.

Look at gas pipeline partnerships.

I am no expert on this subject. But my take is a big no.

Buying and selling for him or her is how they make money. Find a low or no cost investment to
your liking. You are going to pay taxes on earnings on one end or the other I am pretty sure.

Not having someone selling a product to you in this case is not a bad thing. I do not see a benefit. Even though it is their job to convince you otherwise.

What is the advantage?

I have never heard it well-articulated.

Why not 'self-annuitize' your holdings?

Get a risk / age-appropriate basket of low-cost holdings and pay yourself 3.5% of assets per year.

Plus you retain 100% ownership.

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quote:

Originally posted by old rugged cross: Find a low or no cost investment to
your liking.

That's what I've been doing so far. I split between Vanguard and Fidelity in date indexed mutual funds. As I get closer (8-13 years) to retirement, the thought of a major crash bothers me a bit more than it used to. Still, my general take on annuities has been to avoid them. Sounds like I'm not missing anything.

We looked at fixed annuities and a managed IRA. The annuities guy almost >< had us, but, upon careful analysis it just didn't make sense. So we went with the managed IRA.

We've realized about 9-1/2% growth in about a year-and-a-half.

They promise a hamburger tomorrow for hamburgers today.

What if there is a financial meltdown like a few years ago? Can you say Lehman Brothers? Several very large old investment firms melted away. It can happen.

Annuities are life insurance products, in that they are pricing your life expectancy and the law of large numbers into the proposition. When you die, next month, 40 years from now, they keep what's left. Some they win, some they lose. The funds are invested in the meantime, they prosper or not as it happens.

Selling annuities is like a shell game, hide the cost. They pay a lot to those who are effective at persuading you to hand over your loot. If it is a good deal, nobody would need to sell anything. The salesman's interest is so far from yours, you can't trust anything they say. This is why I left the stock brokerage business 47 years ago.

Annuities are, in general, a very bad deal.
Double so if you put one inside an IRA which is a tax deferred investment anyway.
The salesmen really like to sell them for a reason.

No way, not for me/mine.

First, investing is fun. I intend to do it till some carbon function or other stops working, and it becomes my heirs' problem.

Second, annuities are pretty expensive for what they are. The people running them are not especially good at investing, and charge pretty high fees.

Third - annuities put insurance into the mix. Insurance is really hard to price, but the companies know the numbers and you don't, so you are going to have to either a) 'just trust them' or b) get up to speed on actuarial tables and get into depth into terms and conditions to figure out if it makes any sense whatsoever. The last sounds a lot like work, and the first sounds like bad policy in general.

Yes, for a small part...

No.

A big no for me. I have a tremendous amount of flexibility in what I can purchase from Vanguard including many of their outstanding funds.

It sound like you want to lower risk. Take a look at some of the very low expense Vanguard Target funds including the retirement one or the Wellesley Income Fund if you want lower risk though they do have a portion in stocks.

It sounds nice to have no risk of losing money for a very small return but keep in mind you have risk in not participating on the upside either.

Still everyone has to assess their own risk tolerance and plan accordingly.

Yahoo Finance has a nice feature where you can easily look up yearly performance of mutual funds to assess how they have performed in up and down markets. Link below is for Vanguard Wellesley Income Fund and yearly performance. 40 up years and 6 down years.

https://finance.yahoo.com/quot.../performance?p=VWINX

why would you buy an annuity inside of an IRA ?

I sold annuities for a decade (no-loads only, so had no bias even back then). I set up many clients just the way you're thinking (which is good).

My opinion: I would definitely annuitize part of my retirement assets. Reason: to insure (remember that annuities are insurance plans, and this is why) that I can't outlive (at least a portion) of my money.

Specifics: I'd like to set up a payment stream of about maybe $2,000 a month. If worse case scenario happens and for whatever reason I lose every cent of my other assets, I can still count on that 2-grand check coming to me as long as I have a heartbeat. No living high on the hog for sure, but not starving to death either. Provided the contract is with a solid company (A-rated or better), it's a nice comfort level.

This message has been edited. Last edited by: kkina,

quote:

Originally posted by ElToro:
why would you buy an annuity inside of an IRA ?

Correct, you shouldn't use a deferred annuity for assets that are already under tax-advantaged status, but I think the OP was asking about an annuitized annuity (i.e. an immediate annuity), i.e. one that immediately begins payments based on the initial lump sum.

This message has been edited. Last edited by: kkina,

quote:

Originally posted by grumpy1:

Take a look at some of the very low expense Vanguard Target funds including the retirement one or the Wellesley Income Fund if you want lower risk though they do have a portion in stocks.

Thank you for that. Looks very solid. I just put 10% of my IRA into that fund, based on the Morningstar rating and your recommmdation.

Many thanks.