Annuities?

[2manyrocks]

5.2% for 5 years? The Fed funds rate is 4.58% and the Fed says they will continue to raise it. Effective Federal Funds Rate

 

[Fuddyduddy1952]

I don't think there's a one size fits all answer since everyone's situation is different. A financial consultant is good unless they're looking out for themselves (their commission) or your best interest.
When obamacare was enacted my insurance went from $100/mo to $1500/mo. Advice given to me was transfer my IRA to a cash annuity which had a high rate of return and one time cash out so I could switch at any time...my IRA initial value less what was paid out. In my case it was fantastic.
I would recommend talking to a consultant for your specific situation. Vanguard, Fidelity, etc. should be able to assist you.

 

[2manyrocks]

We've gone through an unusual period of the Fed holding down interest rates since 2008, and now they are having to raise rates to fight inflation. Whatever investment advice worked since 2008 now has to be adjusted to factor in what they are doing today and where they are still headed.

 

[MountainBuck]

You folks should look at Ally bank right now. Their savings account at the time of this post appears to be 3.4% and no fees.

Sure it still fails against inflation right now, but they don't have that "new money / old money" gimmick that other banks have where they lower your rate after a time. In fact their interest rates raises with the fed. Other banks don't seem to do that.

 

[JohnDeereJoey]

planningI'd suggest spending some time with a FEE ONLY financial planner. Maybe even more than 1 to get more than an additional perspective.

Don't debate a possible solution(s) before having a clear plan that fits YOUR needs.

Additionally, there are many tools available. I used the free planning tools on Fidelity doing many, different scenarios that I was considering (when to retire, when to take Social Security, sell some of our real estate, selling (or buying! a new, expensive toy, err tractor! . This process proved very useful.

As for the OP's initial question: Annuities can be complex, expensive, and the financial equivalent of handcuffs. Conceptually I love them. Pragmatically, not so much.

 

[Oaktree]

Never understood why people come to forums such as this for financial or medical advice.

My suggestion is to seek out a reputable financial advisor and discuss your needs. Make sure such advisor is not strictly a annuity salesman. Some annuities have very high fees that are not apparent on the surface. Some annuities have cash value you can pass on to your heirs when you pass, others don't. Lot's of variables. Yes, my financial advisor also charges fees, but they are very reasonable and he has made me money to the extent his fees are complete justified.

Never hurts to ask around, might at least give you an idea what questions to ask, what others' experiences are.
Financial advisers are like any other profession, there are good ones and there are hacks. Trouble is, you don't always know which one you have until a few years have passed...investment is a long-term game.

Personally, I'm a bit skeptical about annuities for the very reasons you mentioned. My wife has some of her money invested in them, and at least she didn't lose anything last year.

 

[Oaktree]

You folks should look at Ally bank right now. Their savings account at the time of this post appears to be 3.4% and no fees.

Sure it still fails against inflation right now, but they don't have that "new money / old money" gimmick that other banks have where they lower your rate after a time. In fact their interest rates raises with the fed. Other banks don't seem to do that.

I've been thinking about moving some of my savings into an online bank. Many of them are FDIC insured (I'd totally avoid any that aren't, like some of those pseudo-banks like Chime you see ads on tv for). My regular bank is still paying a pittance, and like you noted play the old money/new money game.

 

[2manyrocks]

A friend of mine's dad was one of the early recording engineers in NYC and then moved to Nashville when country music took off. He had a pretty good amount of money that he invested with a private financial advisor. Well.....the private advisor was another ponzi schemer who eventually went to prison. Unfortunately, the dad was never able to make that money back.

 

[Oaktree]

My dad took out a simple life policy on me when I was in high school. $123 a month, that was about 40 years ago. If I cashed it out right now, I'd only get 5k, but to me, the $123 a month is worth the 25k payout if anything happens to me.

My parents did the same for me when I was a teenager, or maybe slightly pre-teen. Like yours it was a $5k policy (whole life, not term), premium was about half what you're paying. By the time I was in my late 20s/early 30s it had reached the point where the dividends covered the premium. I had the option of not making any more payments and letting the compound dividends keep paying for the policy. I'm in my early 70s now, and that policy is worth over $30k, more than enough to pay my "final expenses".

 

[Sigarms]

As for the OP's initial question: Annuities can be complex, expensive, and the financial equivalent of handcuffs. Conceptually I love them. Pragmatically, not so much.

It seems pretty to simple to me on what I was offered.

No risk on investment, guaranteed percentage rate that would not change. Can pull out the accrued interest if we wanted to before the maturity date.

Only ding is I can't touch the interest until another 2 years or I'll get charged an extra 10% tax on the interest (we have no plans on pulling any money until the maturity date, anyways which will put me in the bracket where I don't get that extra 10% hit off interest).

Honestly, we're not looking for a long term investment, just would like the money to accrue something instead of sitting in a savings or checking account.

Any money invested would be like money playing the stock market. Only invest what you can afford to lose.