Annuities?

[Sigarms]

Anyone invest in annuities?

I work with Northwestern Mutual on an old 401K from an old company and have a couple of whole life insurance plans. I like the guy I work with (always talk to him on the phone as he's two hours away from me).

We have some money tied up in CD's that will be maturing soon from the bank, as well as some "expendable" cash sitting in our savings account that really isn't generating any type of interest.

Needless to say, anything we "invest" isn't "do or die money" and we're figuring we'll be here at our home for the last 18 years until we figure out the game-plan with my wife's 76 year old mother.

Thing is, best rates I've seen on CD's from the bank is around 4%. Could do much better with a annuity.

We don't want to play the stock market with the assessable money we have as our 401K's haven't done as well the last couple of years, but consider it a sin to have money sitting in the bank where it's not generating any substantial income and would like something low to no risk as to losing the investment. We understand that until we both hit age 59, any interest generated from the annuity will be dinged an additional 10% for taxes.

 

[sea2summit]

I wish I'd bought airplanes, bullets, and land 20 years ago and sold them over the last two.

Sorry, I'm no help

 

[jaydee325]

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.

 

[WM75Guy]

I went with tax free municipal bonds with some inheritance money we received. Getting about 3.5% now, but the principal amount has lost some value over the last year. Even with that loss the monthly dividend has been steady and has increased some. For us we would need to get 4.5% from another investment tool to offset the income tax hit. At the time I couldn't find an annuity that would do that.

 

[Sigarms]

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.

If you think I'm going to go out and do exactly what someone tells me to do on a internet forum (per financial advice and or legal or medical advice, you really have miss judged me. I'm looking for experiences of fellow forum members who are most like in my age bracket and most likely have the same work history (AKA works had, long term and try to save money).

I've already followed your advice, but again, since this is somewhat of a new area to me, again, looking for past experiences. Both my dad and FIL aren't around anymore.

 

[Sigarms]

I wish I'd bought airplanes, bullets, and land 20 years ago and sold them over the last two.

Sorry, I'm no help

No worries. I'm getting to the point where I may find out who wants what on my guns and sell off the rest. Sooner or later, depending on my MIL, we are going to be downsizing the house and land.

Ironic, we bought the place with 8 acres and an option to buy an additional 30. We took the option to buy the additional 30 acres. Since I don't farm, the land was nice to hunt and shoot on, but honestly from year 8 through year 15 of owning the place, we kind of regretted on taking out the loan on the additional land. Now that the land has been paid off, I'm thinking it was most likely one of the best investments we made to keep some options open.

Down the road when we sell, will subdivide the land into two parcels. This side of the creek (house side) with 17 acres, the other side of the creek where the blind is at with 20 or so acres. We will most likely keep the land on the other side to see if we want to build something smaller there or not.

We've been in NC for 21 years now, not certain when we retire if we'll further west or not.

 

[ddbackhoe]

If you think I'm going to go out and do exactly what someone tells me to do on a internet forum (per financial advice and or legal or medical advice, you really have miss judged me. I'm looking for experiences of fellow forum members who are most like in my age bracket and most likely have the same work history (AKA works had, long term and try to save money).

I've already followed your advice, but again, since this is somewhat of a new area to me, again, looking for past experiences. Both my dad and FIL aren't around anymore.

I would seek out some free consults from a couple of the larger investment firms (Vanguard, Fidelity, etc). Let them help you make a plan to decide what may best suit your profile and risk/reward goals.

 

[2manyrocks]

One friendly warning. Lets say you invest in a fund that has fixed 4.5% interest today. If rates go to 7%, the value of the fund can go down because it is only paying 4.5% relative to the 7%. An investments guy at a bank put my wife in one of these funds, and she actually lost principal trying to protect her money.

If you directly own the instrument, you can hold it until maturity and collect your 4.5% interest. But beware of buying into a fund that holds the debt instruments for you in an environment when rates are increasing.

 

[Sigarms]

I went with tax free municipal bonds with some inheritance money we received. Getting about 3.5% now, but the principal amount has lost some value over the last year. Even with that loss the monthly dividend has been steady and has increased some. For us we would need to get 4.5% from another investment tool to offset the income tax hit. At the time I couldn't find an annuity that would do that.ou

Right now, I'm being told 5.2% for 5 years, and you can draw any interest accumulated during that process.

Do yourself a favor if you haven't already. Set up a trust, and list any assets to your family trust, and if you don't have a family trust set up, look at doing so.

My mom and dad did that about 30 years ago, and I'm forever grateful they did. Mom died in 2002 and my dad last year. My father wasn't a rich man, but he worked hard and saved what money he had (I always had to convince him to spend his money on himself when mom wasn't around, and after his fitst fly fishing trip to Alaska, he didn't have a problem after that LOL). What he did leave me was absolutely painless per the family trust they set up.

Think about this, you have any bonds, annuities, whole life insurance or anything else, you die, it can be a pain in the butt through probate to deal with the will. A trust makes transfers painless with no probate.

We're in the process now of getting our 401K's into the trust as we thought we had one (estate), but only had a basic will. In the process with all of our other assets as well.

 

[Sigarms]

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. 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.

What you say makes absolute sense and is helpful.

However, I guess we are only looking for something for 3-5 years, because with our son moving out of our home and not knowing how my MIL will play out due to her age, we don't want to tie up some substantial amount of money for too long if that makes sense.

I not a dummy, but when it comes to investing I am LOL

Talking with the guy from NW Mutual, we can't lose any our primary principal investment no matter what the interest rate is, and their rates are better than a CD from a bank. Whatever we invest, the principal is there as long as we don't need to withdraw the money before the mature date. For myself, it's the lesser of two evils by playing it safe.

On that note, I just wish there was a local bank that knew who you were when you came in. Our original bank has been bought out I think 2 times (they cut their local employees), and now we really can't stand the "big name bank". We joined a credit union local and I'm still a member of my federal credit union for the last 20 years or so, but it's still pretty much a bank by online or phone.

I need to look at our one boys universal whole life policy per your comment. The big reason why we got it wasn't so much as an investment, but to cover our son as he got older.

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. Thing is, after I got married and was in my late 30's, my introductory rate for life insurance skyrocketed because I dipped tobacco at the time and my age.

Time to get a life insurance policy is when you're young and don't have any problems. I ended up going with a decent 250k term policy that runs me $550 a year. That expires when I'm around age 67. I did that for my wife when we bought the house and land, so that if anything happens to me it should substantially help my wife out. My dad's policy dropped him at age 85 (or quadruple his premium) and man, was he ever pissed off. Game plan was for the son to be able to draw off it in his 30's if he needed (I'll be in my late 70's by then).

None of us plan for death, and if it's unexpected, a plan in place can be a life saver for your loved ones IMO.

That's what we're finding out per our estate planning. Everything (including insurance) should be in the trusts name.

I was pretty wild and care free in my 20's. Got more mature into my 30's, and after getting married and having a family, just want to protect what we have on the insurance side.

 

[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.