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Ok - so what's the down side? - 9/7/2009 9:31:01 PM
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tfkeel
Posts: 15
Joined: 4/19/2005
From: Pennsylvania
Status: offline
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My bankers are eating me alive. They learned that I "went fishing" in June..... and have a sizeable 401k which I can rollover....
They want to sell me a variable-rate annuity which has a 7-year contract period, meaning that I can be penalized for withdrawing more than 10% of it, and also face a loss of interest, by an amortization schedule, during that 7-year period.
However, this basic deal looks quite good. I am still 9 years away from full social-security benefits, and this contract allows me to take about 5-5-1/2 percent income from the annuity beginning in the 6th year, with the prospectus showing no loss in principal over a 20-year projection. The guaranteed minimum yield is 5%, I receive the higher of market or 5%.
The prospectus shows a death benefit of about 180 percent more than my input sum over 20 years....of course, if the market stays bad and I only get the 5% guarantee, there will be no growth if I withdraw the 5%
as income in each year.
Advice....anyone?
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RE: Ok - so what's the down side? - 9/7/2009 10:12:37 PM
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duffer1
Posts: 105
Joined: 4/11/2005
From: snowy frozen wasteland of NNY
Status: offline
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If I were faced with this type of situation, I would probably go to the CPA who prepares my income taxes. He would not receive any direct benefit from a 401K rollover and would be in the best position to review your options from an impartial point of view. His fee for doing my taxes won't be impacted by any of those choices. Plus I would pay him his normal consulting fee.
The problem with bankers and insurance agents is they have a personal interest that will outweigh your interest. They have their commission (or stockholders) to think of and will "sell" you what they have to offer even though it might not be in your best interest.
I probably won't face this situation since I am within reach of my retirement and could elect to take distribution if I went "fishing". However, I've done the math and a few more years will ensure that I won't have to become a greeter - if you know what I mean!
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RE: Ok - so what's the down side? - 9/7/2009 11:39:35 PM
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Ps103
Posts: 12146
Joined: 4/16/2005
From: Here, now
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I would do like Duffer suggested and talk to someone who does not make a direct benefit from whatever you choose to do.
What are the fees with this annuity? Usually they are very high, which would keep me away from them altogether.
_____________________________
Fasten your seatbelts...it's going to be a bumpy night.
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RE: Ok - so what's the down side? - 9/8/2009 10:29:16 AM
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blessedinnyc
Posts: 2903
Joined: 10/12/2007
From: NYC by way of Chicago
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quote:
I would do like Duffer suggested and talk to someone who does not make a direct benefit from whatever you choose to do.
What are the fees with this annuity? Usually they are very high, which would keep me away from them altogether.
_____________________________
Fasten your seatbelts...it's going to be a bumpy night.
Sometimes, the fees can be worth it if they come with riders that protect your investments.
A 75 basis point fee to protect your investments from going down or even guarantee an increase over a 5-10 year period may not be a bad deal at all, IMHO. People who got variable annuities with that insurance back in the late '90s- or those who would have gotten them if they existed in the mid '20s through very early '30s or mid '60s through early '70s would have saved themselves a lot of money.
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RE: Ok - so what's the down side? - 9/8/2009 12:16:25 PM
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clydewolf
Posts: 43
Joined: 8/6/2009
Status: offline
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Tfkeel,
The down side of any annuity is usually the fees assessed to the contract.
You need to ask the "bankers" what is the down side of waiting a bit.
You should learn more about annuities at the SEC website.
Here is a link discussing Annuities in general:
http://www.sec.gov/answers/annuity.htm
And here is one titled, Evaluating Your Retirement Options:
http://ww.sec.gov/investor/pubs/teacheroptions.htm
It sounds like you have separated from your 401k plan sponsor. And because you are over age 55 and have separated from your employer, you can take penalty free distributions from your 401k plan.
You also have the option of transferring your 401k plan to an IRA, but that would negate the penalty free distributions until you reach age59.5.
Go to your local library and borrow a book by Ed Slott, The Retirement Savings Time Bomb and How To Defuse It. You can get a copy at your local book store or Amazon.com, It is the 3rd book on this list:
http://www.amazon.com/s/ref=nb_ss?uri=search-alias%3Dstripbooks&field-k
Then do some reading.
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