Annuities?

[Jstpssng]

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.

I've learned a lot from reading this type of discussion here. Unlike a financial advisor, members here aren't paid and give advice based strictly based on experience. I'm not about to run out and do as somebody suggests, yet do come up with some good questions to ask.
Based on another discussion, I am going to talk to my 401K plan manager about putting future contributions into a ROTH, rather than conventional account; something I never even considered until reading about it on TBN today.

 

[ovrszd]

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.

I've got a real good friend who owns tens of thousands of acres of land. That's how he's invested every dime he has accumulated over the past 40 years. Might be the thing to do with the investment resources you have. After all,,,,, they don't make no more land.

Harrison County is a rather large County here in Missouri. Land owners are from 11 different countries. A guy from Florida is buying the 40 next to me.

Missouri land seems cheap for investors from higher cost of living areas.

 

[M59]

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).

Sigarms,

First of all. Excellent member ID. They make high quality tools and stand behind everything they make.

I would strongly suggest you interview FEE ONLY investment advisors as they charge a fee for investment advice and never earn a commission by selling a product. They have ONLY your best interest in mind.

What ever you place your investment money into, you must always consider length of time till its needed and willingness/ ability to tolerate risk. I would never say whole life and annuities are wrong, I would only say they are wrong for me for the following reasons:
Annuities typically pay 100% of first year as comission to selling agent ( OUCH ) and then a declining rate rate for next 5 years. Whole life is very similar.

Both annuities and whole life will always generate lower payments than the average long term ( 10 year ) of the S&P 500 as what the sellers are actually doing is investing your money into equities and other instruments and paying you a substantially reduced safe amount and they pocket the expected profit on the differential between market return and what is paid to you.

Best wishes and profitable outcomes in your search

 

[Sigarms]

I've got a real good friend who owns tens of thousands of acres of land. That's how he's invested every dime he has accumulated over the past 40 years. Might be the thing to do with the investment resources you have. After all,,,,, they don't make no more land.

Harrison County is a rather large County here in Missouri. Land owners are from 11 different countries. A guy from Florida is buying the 40 next to me.

Missouri land seems cheap for investors from higher cost of living areas.

I'm certain you over estimate my "investment resources"

Sometimes it's just nice not to have to live paycheck to paycheck and being debt free.

Thing is, when I was younger, I never thought "long term" (honestly I figured I'd be dead by the time I hit 30).

Coming up to age 60, and need to start some kind of game plan other than me and the misses 401K's.

Funny, always thought I hated Missouri, never heard anything good about that state from guys who went to Ft. Leonard Wood. Living in in the western part of NC now for 20 plus years (still about 90 minutes east of M59), I know it's kind of like judging NC by living in Fayetteville NC.

 

[Sigarms]

Both annuities and whole life will always generate lower payments than the average long term ( 10 year ) of the S&P 500 as what the sellers are actually doing is investing your money into equities and other instruments and paying you a substantially reduced safe amount and they pocket the expected profit on the differential between market return and what is paid to you.

Thank you for that explanation, makes sense and what I figured in a long about way.

I joke with my wife, for the best return on investment, we should just grow 100% pure weed that isn't laced with anything. Other idea (and more legal) would be to buy a pallet of R410A now. When I think to the 90's and what a drum of R22 was going for, I could have invested in freon and become a rich man selling it under the table (as I said, "more legal"). That said, I'm old enough and into a career I play by the rules now LOL Keep in mind, last paragraph is nothing more than a bad joke.

 

[Sigarms]

I've learned a lot from reading this type of discussion here. Unlike a financial advisor, members here aren't paid and give advice based strictly based on experience. I'm not about to run out and do as somebody suggests, yet do come up with some good questions to ask.
Based on another discussion, I am going to talk to my 401K plan manager about putting future contributions into a ROTH, rather than conventional account; something I never even considered until reading about it on TBN today.

BINGO!

 

[M59]

I've learned a lot from reading this type of discussion here. Unlike a financial advisor, members here aren't paid and give advice based strictly based on experience. I'm not about to run out and do as somebody suggests, yet do come up with some good questions to ask.
Based on another discussion, I am going to talk to my 401K plan manager about putting future contributions into a ROTH, rather than conventional account; something I never even considered until reading about it on TBN today.

Jstpssng,

I presume when you indicate "conventional" account you mean IRA. The IRA vs Roth IRA is a play that depends on several factors including your current and future expected Federal tax bracket. IRA is a pre tax instrument and Roth IRA is a post tax instrument. IRA withdrawals are taxed as earned income in the future when you withdraw the money. Roth IRA money is taxed at existing Fed tax rate and grows tax free when you withdraw. The decision to choose IRA or Roth is dependent upon Fed rules. If you make too much money then you are excluded from Roth contributions. I don't know what current limit is but it used to be $150K. Link to rule: ( New income ranges for IRA eligibility in 2021 | Internal Revenue Service)

IRA's also have downside of RMD / Required Minimum Distribution which start at age 72 and RMD percentage increases each year. Effectively forcing the IRA owner to deplete the IRA and benefiting the US govt by collecting income taxes each year. Roth IRA have no RMD.

The rule of thumb when deciding whether to choose IRA vs Roth IRA is whether you are currently in lower or higher tax bracket now than when you retire. For example. If you make $84-178K now and can live on $83K a year then go pretax IRA at 22% bracket and withdraw it and pay taxes in 12% tax bracket. This all based on Fed tax brackets during your earning years vs income needs and tax brackets in retirement years.

Now the interesting part. You make $650K a year and are denied the Roth IRA so you go pretax IRA and get a 37% tax break. Then you do what is known as Mega Roth roll where you take money out of IRA at amounts that don't exceed the 22% tax bracket. You just had your cake and ate it too by avoiding 15% in taxes. Fed govt caught on and are eliminating this play in 2032.

Peter Thiel, who owned a portion of Paypal, dumped ALL his ownership of Paypal, a few thousand dollars, into a Roth. Thiel's holding, as Paypal became more valuable, is now currently valued at $5 BILLION dollars and ALL tax free.

Fun times.

 

[Jstpssng]

^^^^^
Actually, I meant ROTH 401k. I don't know much about them, but after reading this thread I realized I need to look into them.

 

[M59]

^^^^^
Actually, I meant ROTH 401k. I don't know much about them, but after reading this thread I realized I need to look into them.

The Fed tax bracket of 22% is tipping point for whether to decide to go IRA or Roth IRA. In early income earnig years when making less than $83K then it makes sense to go direct to Roth since tax break is only 12%.

Like I said Fun Times. "Progressive" tax code keeps accountants and retirements advisors in the land of clover and honey.

 

[3Ts]

When deciding on whether to invest in a 401K or a Roth IRA or any other similar style of investment, check to see if your employer will match the funds that you put into it. I've had employers that will match anywhere from 25% to 100% of what you put in.

 

[M59]

When deciding on whether to invest in a 401K or a Roth IRA or any other similar style of investment, check to see if your employer will match the funds that you put into it. I've had employers that will match anywhere from 25% to 100% of what you put in.

If you get a match then wonderful BUT always always ALWAYS max out the 401K and any other pre tax investment vehicle since that is one less dollar that Uncle Sam gets to tax. Sometimes, if you are lucky, socking money away into pre tax vehicle can move you into lower Fed tax bracket. Double wonderful

Fun Time with tax code.

 

[MossRoad]

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.

Here, this will help...

13 Reasons Why Annuities Are A Good Investment (2023)

We will explore 13 reasons why annuities are a good investment so that you can make an informed decision about whether or not they are right for you.

www.annuityexpertadvice.com

8 Reasons Why Annuities Are A Poor Investment Choice (2023)

An annuity is not for everyone, just like other investments. Learn 8 reasons why annuities are a poor investment choice.

www.annuityexpertadvice.com

 

[MossRoad]

Glad I could help.

 

[Jstpssng]

This

Roth 401(k): Is It The Right Option For Your Retirement Plan?

A Roth 401(k) is an employer-sponsored retirement plan that's funded by after-tax dollars. It shares certain similarities with a traditional 401(k) and a Roth IRA, although there are important differences to understand. Roth 401(k) vs 401(k) Taxes and when you pay them are key to understanding

www.forbes.com

answered my question. The only wild card is how much money it may grow before withdrawals. For somebody younger it would be worthwhile to consider it. I'm looking 8-10 years out so will keep it in the regular 401k.

 

[M59]

This is why an annuity, any annuity, is not something I can justify for myself and for most people. Bottom line is an annuity is someone else is taking your money, investing it, and then giving you a guaranteed pittance every month. Plugging $100K into the following Schwab annuity (Income Annuity Estimator: Calculate Your Payout) for a 61 year old person and desiring annuity to start 1 Dec 2023, the MONTHLY income is $592 for life. Unless my math is wrong, the 1st years rate of return is 7.104% and gets worse as the money handed to the annuity seller grows in value FOR THE ANNUITY SELLER.

I have attached several pictures showing yearly gain and loss for S&P. Notice that the total number of yearly gains far exceed the total number of losses since the great depression AND the percentage gains frequently FAR exceed the losses.

In 2022 (Left pic ) the S&P was down 19.44% over the year and 2021 ( Right pic ) was up 26.89%.
S&P link: S&P 500 Index - 90 Year Historical Chart

Again, my personal preference is to avoid annuities as one receives very little in return for handing an investor your hard earned money for which THEY profit handsomely.

I appreciate MossRoad's links to pros and cons but much, in my opinion, is glossed over in both the pros and cons. A good fee for service advisor is the best resource for planning for retirement AND self education is always in your best interest. I am not, and never have been, a member of or affiliated with the investment community so I have no ax to grind in any direction.

Hopefully not rocked any body's boat with this comment.

 

[Fuddyduddy1952]

We got lucky...8% fixed rate until death, then passed to beneficiary. It's just part, about 10% of portfolio. For us it suits.

 

[ovrszd]

I'm certain you over estimate my "investment resources"

Sometimes it's just nice not to have to live paycheck to paycheck and being debt free.

Thing is, when I was younger, I never thought "long term" (honestly I figured I'd be dead by the time I hit 30).

Coming up to age 60, and need to start some kind of game plan other than me and the misses 401K's.

Funny, always thought I hated Missouri, never heard anything good about that state from guys who went to Ft. Leonard Wood. Living in in the western part of NC now for 20 plus years (still about 90 minutes east of M59), I know it's kind of like judging NC by living in Fayetteville NC.

Peace my friend.

 

[drssg]

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.

There are a bunch of different types of annuities that have different rules. When I looked into them, they wouldn't support a 3-5 year investment plan. You could take the money out whenever you want, but the guaranteed rate of return goes away. You would get whatever the underlying investments actually got for the invested time period.

Yours might work differently, but I would verify that with your financial advisor. It would be bad to get a nasty surprise in several years.

 

[kenmac]

I have / had some money sitting in a regular savings account. I have talked to my advisor several times about buying an annuity with this money. He will not talk to me about an annuity. All he says is he doesn't like them , so he won't even discuss them with me, even though he can sell them.
He says for some, they are great, but in my situation, he says no !
Instead of annuities, he has gotten me into private equities.

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

Oh, and someone mentioned RMD's @ 72. They raised the age again for RMD's, it's now 73.
I hope they continue kicking that can down the road...., 74,75,76 etc, LOL

 

[marhar]

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 tax

From your post, I assume you are younger than 59. If you are interested in the lifetime income an annuity will provide I suggest investing the money in a variable-rate annuity invested in index funds. I suggest a conservative approach that will be classified as asset preservation/income generation. When you are ready to begin the income stream I suggest a dual life annuity; doing so will give you a much larger payout but your heirs will not inherit any investment in the annuity. I am not affiliated with Fidelity; I cannot say enough good about the annuities they sell. I helped a 75-year-old friend buy a direct annuity yielding +9%.

Do not go to an investment firm that earns a commission get your business.