Annuities?

[Sigarms]

So, I took part of this savings account money and did something I have never done, I bought a 15 mo CD @ 3.75 %

The way I'm viewing this particular annuity is it's pretty much like a CD and we can do a 3 year at 4.5%

 

[mikester]

I've had an annuity for 30 years. I can select from about 30 funds to invest in and I can reallocate whenever I choose without penalty. I've mostly chosen stock funds - occasionally overseas opportunities. After 7 years there were no fees and taxes are paid (when money is withdrawn). In 30 years the funds invested have gained 74%. The two funds I'm currently in have returned a little over 9% per year on average.
This annuity was recommended by a broker (a descriptive title if there ever was one) and there haven't been any surprises but I'd suggest caution in selecting an annuity if you go that route I'm sure some types of annuities are not wise investments - the insurance industry has a powerful lobby.
Stock historically are the best investment - all sectors have taken a beating recently and who knows when or if the markets will rebound.
There are two outfits I'd recommend looking into for a better idea of investing -
1. Investors Business Daily - gives in depth stock data with ratings of thousands of companies
2. The Motley Fool "" "" plus more coverage of bonds and other forms of investment
Both are pay sites but probably offer a free trial.
Hope this helps...
On edit... When we had our first child we invested in a Universal Whole Life insurance policy - the premise was that we paid $1,000 a year, every year and by retirement age we'd have plenty of money to live on. In reality the life insurance end of it took more and more of the policy's contents each year as we aged - by retirement age the policy would do little more than pay the life insurance premium. Thankfully a friend gave us an newspaper article explaining the fraud of UWL before we sank more money into it.

I'm trying to understand the math here.

If your total investment has gained only 74% in 30 years you are only getting about 2% per year on your initial investment. Inflation tends to be 2-3%. I wouldn't be very happy with those returns.

Personally I don't see much benefit in annuities because they tend to favour the company selling them over you. Have too much money? Buy an annuity.

 

[Sigarms]

Have too much money? Buy an annuity.

I don't have too much money, but at my age, I don't want to lose anything and would just like a better return than what the bank offers for it sitting there doing nothing.

 

[workinonit]

I just bought one. Brand new product. Guaranteed 7% return but has no ceiling. They are not for everyone but fit my portfolio nicely. That portion of my money is with Edward Jones and managed by someone I trust. This product is one they have 100% confidence in.

 

[thclimer]

I like the following quote, just like you would not let your friend drive drunk:

"Friends don't let friends buy an annuity"

The sales pitch on these can sound very attractive, but you are paying a lot for essentially what turns out to be an insurance policy on an investment.

Please talk with a Fee only based financial advisor and have them review the proposal you have for the annuity, they will be able to specifically point out its cost and shortcomings.

The fine print can be very confusing even for the average investor......if this then that, minimum % base upon maximum over XX years, when the moon is full and there is no lunar eclipse, x% distribution on even years and y% distribution on odd years if a certain index provided a positive return and you can only loose a maximum % if another index had a negative return, the percent increase is not calculated on your base investment but rather on the percent of your interest gain in years 2, 4 and 6......

You are probably better off to just buy a few CD's if your are looking for a short term (3-4 years) return.

If your looking for longer term (8-years+), take the advise of Warren Buffet as it is incredibly difficult to beat the S&P 500 index.

 

[MossRoad]

Wish I could hit good post a hundred times on that one.

 

[MossRoad]

The way I'm viewing this particular annuity is it's pretty much like a CD and we can do a 3 year at 4.5%

There are a bunch of CDs out there right now for that rate.

A nice thing about the CDs we are in is that IF for some reason you need the money in a pinch, the penalty for early withdrawal is just a few months interest.

What's the penalty on an annuity?

 

[Sigarms]

There are a bunch of CDs out there right now for that rate.

A nice thing about the CDs we are in is that IF for some reason you need the money in a pinch, the penalty for early withdrawal is just a few months interest.

What's the penalty on an annuity?

The highest I've seen locally at a bank is 4%.

Not worried about needing the money in a pinch. Leaving it and letting it go to the mature date. Nice thing about the annuity is I can pull the first 4% after the first year if I need to (3 years at 4.5%).

 

[turbo36]

There are a bunch of CDs out there right now for that rate.

A nice thing about the CDs we are in is that IF for some reason you need the money in a pinch, the penalty for early withdrawal is just a few months interest.

What's the penalty on an annuity?

Some CD's have EWP as long as 12 months. Be sure to read the fine print.

 

[turbo36]

Someone mentioned municipal bonds earlier, I'd like to expand on my experience.
Generally Muni's are exempt from federal, and in some cases, state and local taxes. If you are in a high tax bracket Munis can have some very positive net results. For example; a 4% tax free muni is equivalent to a 6-7 percent taxable depending on your combined fed and state tax rate.
This summer, my wife and I moved a large portion of our portfolio to 4% or better AA insured municipal bonds. Most of them have a ten-year call, so we are guaranteed an insured investment for at least the next 10 years. I've always had risk to manage in my life with my businesses, and after a while, it gets tiring for some. For my wife and I this made sense as we have no children, so no pressure to increase the portfolio to leave to people that didn't earn it. At the end, we will donate it to some worthy charity of our choice.

Will Rogers quote: “I’m not so much interested in the return ON my money as I am in the return OF my money.”