If anyone reading the stuff above is even slightly confused by it all, I will offer a suggestion, that I often offer on these discussions.

See if your local library has copies of "Personal Finances for Dummies," and "Investing for Dummies." Both books will help you understand the basics of these topics, so you can make informed choices, and avoid scams.

That is not meant as joke, but is serious advice, and the same advice I give to friends and family who ask about these topics. I always tell them to read those books, and then we can have a good informed discussion about it.

Somebody said keep it simple. Annuities are a bad investment and life insurance isn’t an investment. Both will be sold as such because of........ commissions.

Life insurance has its place in your financial plans but if somebody starts talking investment, run.

The above advice about running from anyone selling financial products is extreme but fairly sound advice nonetheless.

quote:

Originally posted by Aeteocles:
Beware anyone that earns a commission on the products they sell.

FTW.

Just another leftover way to sodomize people. Realtors, FA, you name it.

They just need the action of doing stuff, not actually winning for their clients.

quote:

Originally posted by Lunasee:
I knew very little about investing/retirement. Five years before I retired from Intel, I heard Warren Buffet say he was a fan of Index funds. I have been all-in a Vanguard and Fidelity index funds since. I retired two years ago. I have been living on one of these funds since I retired (at the same rate as when I was working). That fund is now $50K higher than when I retired.

I'm very pleased with index funds.

That's all true. However, there's some confusing terminology, so to clarify: "index funds" and "indexed annuities" are two completely different things, though they share a common element as both are tied to an index (which is simply a list of stocks used as a metric for market performance).

This stuff is very confusing for someone who's never been in the industry, and even for those who have.

quote:

Originally posted by DMF:
Think what you want, but each state regulates the 529 plans, and limits what investments are eligible. Which often means the high commission plans many of the financial planners love to push are NOT part of the 529 plan.

No, 529 plans are regulated by the IRS and a little bit by the SEC. The state doesn't have jack shoot to say about what is an eligible expense. States can define what is taxable and non taxable for certain investments for residents vs non-residents. The states don't have anything to say about what is covered or not covered by the plan. For example, computers were just recently covered if required for a college class via an IRS ruling.

quote:

Originally posted by DMF:
Also, in the state plan my friend would want to use, none of the investments are one this financial planner could get his regular commission. His sole interest in discouraging the 529 plan was he can't get his high commission.

Then why didn't your friend just invest in the wonderful plan that you're thinking of if it was such a great idea?

quote:

Originally posted by DMF:
Diversity, ability to adjust for time frame and risk tolerance (including automatically), and a big tax advantage. It's a great (often the best) option for many, when trying to save for education.

Define diversity.

Think an age based set plan is good? I don't. Think two option changes are year is a bit restrictive? I certainly do. You make two changes in a year and shit goes south, guess what? You're stuck. Only thing you can do is pull out and pay taxes on the gains or reinvest in another plan. Ever seen anyone that wants to bail and take a hit? I've seen plenty.

Define often.

A boat load of people got scared in 2008 and 2009. A boat load of people get scared in any bear market. What do they do? They change the 529 option into FDIC (or other protected investment) and forget about it. They then get their heads handed to them on a platter when it comes time for withdrawals. Ask me how I know this?

Taking the tax hit and investing yourself or a following the guidance of a financial adviser will "often" make you fare better.


On a final note:

Are you aware of the fact that 529 plans can now pay for K-12 private school education? I'm all for that but the churn in contributions and withdrawals has the possibility of wreaking havoc on many state plans. My employer has planned for that. Many plans have not. If you didn't know that, a good financial adviser would.

I'm not schooled in 529 plans (no pun intended), but I believe that they started out at the state level, then were later brought under federal regulation.

IRS Section 529

But back to the OP's financial freedom. Sorry for the thread hijack. Congrats.

Edited:

Sorry for the stupid link KKina

529's were stared by the Feds under IRS section 529 and adopted by states.

quote:

Originally posted by Bytes:

quote:

Originally posted by Aeteocles:
Beware anyone that earns a commission on the products they sell.

In fact, beware anyone that sells you a product.

Agreed. I only trust people that work for the good of mankind

Alternatively, you could just pay separately for someone's expert advice. Wouldn't that advice be more trustworthy than going to a commission based sales person?

Why would you walk to a Ford dealership and trust the advice of the guy on the sales floor? He clearly has incentive to sell you Ford products. Even if he wasn't being an outright dick and trying to put you in a Ford when a Ducati is really what you need, all his training is in Ford products. When all you have is a hammer, then all your problems begin to look like nails.

quote:

Originally posted by Aeteocles:
Alternatively, you could just pay separately for someone's expert advice.

But what if they are making money from said advice? That's why you only trust people that are working for the good of mankind

quote:

Originally posted by HRK:

quote:

a deferred annuity account

Before you invest in an annuity, check the fee and commission schedule, most of these are major commission makers for Financial advisers, and in almost every situation it's not a great idea to go into an annuity, it's rare they are a good investment vehicle unless you are the agent selling them.

You need to know what type of annuity, what it's provisions are for your funds after death, some annuities when you pass that's it there is no passing on of the stream of funds, so if you live to take funds for 50 years great, but if 5 years later you pass, you may have just given the company a windfall.

Google and research them, and read up on Clark Howards investment advice page, he's not a fan... Go to his page and search annuities.

http://clark.com/search/?q=annuities

Oh and get a couple more FA advice, compare fees, and be sure the advice he's giving you doesn't create a tax burden that you have to pay.

If you haven't already, have him give you a schedule of the amount you transfer, his commissions and fees and net invested into the product before you leap.

Great advice in this post. Annuities are recommended by salespeople, er, "financial advisors" primarily because they make great commissions from them. Whether they are a good investment or not is another story.

quote:

Originally posted by Bytes:

quote:

Originally posted by DMF:
Think what you want, but each state regulates the 529 plans, and limits what investments are eligible. Which often means the high commission plans many of the financial planners love to push are NOT part of the 529 plan.

No, 529 plans are regulated by the IRS and a little bit by the SEC. The state doesn't have jack shoot to say about what is an eligible expense. States can define what is taxable and non taxable for certain investments for residents vs non-residents. The states don't have anything to say about what is covered or not covered by the plan. For example, computers were just recently covered if required for a college class via an IRS ruling.

What a ham-fisted attempt at a strawman argument. Not once did I say the states determined what's an eligible expense.

But I did say the states decide what are eligible investments.

No one needs to take my word for it though:
https://www.sec.gov/reportspub...pubsintro529htm.html
"A 529 plan is a tax-advantaged savings plan designed to encourage saving for future college costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code."

https://www.investor.gov/addit...ary/529-plan-sponsor
"A state, a state agency or educational institution that chooses a plan manager and determines the rules and limits for its plan.

While there are some private institutions sponsoring 529 plans, most people in the market for a 529 plan are going to be looking at state sponsored plans. The states sponsoring the plans control what people can invest in. Which means much of the crap that commissioned based advisors push are not eligible.

Your strawman about eligible expenses is a huge fail, and you're wrong about who controls where money for 529 plans can be invested.

quote:

quote:

Originally posted by DMF:
Also, in the state plan my friend would want to use, none of the investments are one this financial planner could get his regular commission. His sole interest in discouraging the 529 plan was he can't get his high commission.

Then why didn't your friend just invest in the wonderful plan that you're thinking of if it was such a great idea?

Well, myself and some others have convinced him to reconsider what the commission driven advisor was pushing, and he has not put any money with that guy. Another relative who is a CPA and tax attorney, and I, will be sitting down with him in a couple weeks to cover over the pros and cons of the various options.

quote:

quote:

Originally posted by DMF:
Diversity, ability to adjust for time frame and risk tolerance (including automatically), and a big tax advantage. It's a great (often the best) option for many, when trying to save for education.

. . . Think two option changes are year is a bit restrictive? I certainly do. You make two changes in a year and shit goes south, guess what? You're stuck. Only thing you can do is pull out and pay taxes on the gains or reinvest in another plan. Ever seen anyone that wants to bail and take a hit? I've seen plenty.

Oh good lord, most people lose more money by panicking, and shifting assets around needlessly, than by riding out the market's ups and downs. Hell, you even bring that up:

quote:

A boat load of people got scared in 2008 and 2009. A boat load of people get scared in any bear market. What do they do? They change the 529 option into FDIC (or other protected investment) and forget about it. They then get their heads handed to them on a platter when it comes time for withdrawals.

Yep, people who panic, and make foolish moves often suffer. That isn't a flaw to the 529 plan, it's a flaw in their choices in what to do during market swings.

quote:

Taking the tax hit and investing yourself or a following the guidance of a financial adviser will "often" make you fare better.

Well that's a bunch of nonsense. While some states' 529 plans offer lousy options, most have very good options, and you get a tax break. That along with lower fees, means most investors can benefit greatly from a 529 plan, rather than passing on the tax hit, and giving away money to a financial advisor.

quote:

On a final note:

Are you aware of the fact that 529 plans can now pay for K-12 private school education?

Sure am, but again I never brought up eligible expenses, you're trying to bring it up to continue your poorly constructed strawman. However, let's get on to this:

quote:

I'm all for that but the churn in contributions and withdrawals has the possibility of wreaking havoc on many state plans.

(sic) The bulk of the money being invested in 529 plans is going to undergrad and grad schools, not K-12 private schools. 529 plans are not seeing this "havoc" you are claiming.

That nonsense you're pushing sounds like the crap pushed by companies like USPA/IRA (now First Command), who wanted to discourage investment in no-load mutual funds, so they could hawk their high front load contractual funds. They too screamed the sky would fall due to the "churn" in contributions and withdrawals. It was nonsense then, and it's nonsense now.

I didn't need to pay high commissions to see through their BS years ago, or what you're pushing now.

quote:

Originally posted by kkina:
I'm not schooled in 529 plans (no pun intended), but I believe that they started out at the state level, then were later brought under federal regulation.

The name "529" comes from section 529 of the Internal Revenue Code. Just like "401(k)" gets its name from that section of the Internal Revenue Code. The states are just the major sponsors of those plans, along with some educational institutions.

quote:

Originally posted by DMF:

quote:

Originally posted by kkina:
I'm not schooled in 529 plans (no pun intended), but I believe that they started out at the state level, then were later brought under federal regulation.

The name "529" comes from section 529 of the Internal Revenue Code. Just like "401(k)" gets its name from that section of the Internal Revenue Code. The states are just the major sponsors of those plans, along with some educational institutions.

Oh, I know where the number comes from. I was referring to the historical origins, not the coding.

quote:

Originally posted by Bytes:
There are good financial advisers and bad financial advisers. The good ones make really good money because they work for commission and do a really good job.

Some do. Some work on a percentage of assets under management. No commissions, just a percentage of the account. The more they grow the account, the higher their quarterly fee is. Some brokers work either way depending on what type of account you have.