fixed annuities

[california dreamer]

considering for long term investment. what questions should we be asking our financial adviser re: fees, commissions, etc;
we are no risk tolerance, so makes it hard to invest by the time they take out fees in fixed accounts.

[rjm1cc]

I would not call this an investment. The purpose of an annuity is a guaranteed income stream. But in your case I guess the question is if the annuity earns x what percentage of x do I get and what do you get. Be sure your share does not include a return of the money you gave them. This money comes back to you tax free. Thus you want to know what is the taxable income you would get and how does that compare to what they get.

[california dreamer]

good point. these annuities are insurance companies with "riders', cannot touch for 5 years, and then income of %5 able to draw out if we choose. we probably won't draw.

[KayakerNC]

considering for long term investment. what questions should we be asking our financial adviser re: fees, commissions, etc;
we are no risk tolerance, so makes it hard to invest by the time they take out fees in fixed accounts.

You REALLY need to educate yourself on annuities. As has been noted, they are not investments, they are a "Risk Transfer" product. A good place to start is the Retirement Mentors website on MarketWatch.
Retirement Mentors (http://www.marketwatch.com/retirement/mentors)
It's a dangerous minefield out there, so be very careful. Be especially wary of anything called a "Hybrid" or "Fixed Index". Sadly, some advisers consider their fiduciary duty to their wallet, rather than your best interests.

[batman911]

Never listen to financial advisors that make a profit from products they sell to you. Do your own research.

[kbace6]

If your "Financial Adviser" works on commission or some other percentage based on what you decide to purchase, then they are NOT a financial adviser, they are a sales person. As long as you know who you are talking to is the most important thing first.

[l2ridehd]

Here is a good place to get a basic education on annuities.

http://www.bogleheads.org/forum/viewtopic.php?t=990

Personally I prefer to mange my own risk vs paying someone else to accept it. It also has a company risk of who is providing the product. Advisors push annuities because they make a profit by selling them. Maybe a SPFA (single premium fixed annuity) might have a place in some portfolios, however a good AA (asset allocation) balanced regularly, invested in low cost index funds with broad diversity is a much better option for most. Very easy to manage yourself in an hour a month and a better success analysis (Monte Carlo analysis) over the average retirement span. And you retain more of your own money in the end.

[california dreamer]

wow. this advisor is fee based but did mention commissions as well. I'm wondering if we would be better off taking the time to get educated and handling our own finances directly with reputable financial companies online.
thanks for the info so far and the websites.

[jimmy D]

wow. this advisor is fee based but did mention commissions as well. I'm wondering if we would be better off taking the time to get educated and handling our own finances directly with reputable financial companies online.
thanks for the info so far and the websites.

Forget the reply where the person gets 5 % income. That person does not know annuities and how they work. For the Bogle heads. It is no load but the returns are less than other good companies. All financial advisors do not charge a fee. some by hour etc. So lets set the record straight. I was in the business for 33 years and I have not seen a true ad in the paper since I moved here 2 years ago. For what its worth

[Cedwards38]

Here is a good place to get a basic education on annuities.

Bogleheads • View topic - Immediate Annuities (http://www.bogleheads.org/forum/viewtopic.php?t=990)

Personally I prefer to mange my own risk vs paying someone else to accept it. It also has a company risk of who is providing the product. Advisors push annuities because they make a profit by selling them. Maybe a SPFA (single premium fixed annuity) might have a place in some portfolios, however a good AA (asset allocation) balanced regularly, invested in low cost index funds with broad diversity is a much better option for most. Very easy to manage yourself in an hour a month and a better success analysis (Monte Carlo analysis) over the average retirement span. And you retain more of your own money in the end.

This is excellent advice. It ain't rocket science. Even I can do it with the low cost index funds.

[manaboutown]

Last week's Barron's had an extensive review and assessment of various types of annuities.

[JourneyOfLife]

Is the OP's question about a Fixed Immediate Annuity (SPIA - payout for life) or a Fixed Deferred Annuity (to accumulate more value)?

[california dreamer]

The annuties would not be touched til 5 years, and then at that time can withdraw, monthly interest amount, at 5%. we are going back for 2nd consultation.
concerned about fees, so will ask about that. The principal is guaranteed unless we start withdrawing each month more than the 5%, then we would be dipping into principal. will find out the exact type of annuities name so can research. any other questions we should be asking to protect ourselves??

[KayakerNC]

The annuties would not be touched til 5 years, and then at that time can withdraw, monthly interest amount, at 5%. we are going back for 2nd consultation.
concerned about fees, so will ask about that. The principal is guaranteed unless we start withdrawing each month more than the 5%, then we would be dipping into principal. will find out the exact type of annuities name so can research. any other questions we should be asking to protect ourselves??

Sounds like a Fixed Index Annuity with an Income Rider (extra fees) attached. Not a fan.
This type of Annuity is the one that offers the highest commission to the Adviser (aka Salesman), so, naturally, it is the one most often pushed. You might be better served to consult a FEE-ONLY adviser to start a plan that is in your best interests.

[JourneyOfLife]

Personally, I would not buy anything that I did not understand or understand how it fits into my financial and estate plans.



There is some "very basic" information on the FINRA web site that you may find a little helpful. But they may not have any information about the type of annuity you are being offered.

Investors - FINRA (http://www.finra.org/Investors/)

Here is the FINRA information about selecting investment professionals

http://www.finra.org/investors/smartinvesting/gettingstarted/selectinginvestmentprofessional/

Here is the FINRA Broker check tool.

BrokerCheck: Research Brokers & Investment Advisers - FINRA (http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/)

[california dreamer]

Thanks-I went on to the broker site and looked up the broker. good first step.

[rjm1cc]

Once you get the info from your sales person try Vanguard and Fidelity https://www.fidelity.com/research-annuities/overview to see what they would charge for an annuity.
Do a search on annuities on the internet and look for pricing calculators. Immediate Annuities - Income Annuity Quote Calculator - ImmediateAnnuities.com (http://www.immediateannuities.com/)
I am not recommending the links. Just a place for you to start.

[california dreamer]

thanks. lots of good information on those sites as to the different kinds of annuities. ok, so we know the sales pitch for annuities and to check for commissions, fees.
my question is, for having a fixed account and not being able to touch the account for at least 8 yrs due to IRS age penalties for early withdrawal, are annuities the way to go? or some other deferred account plan available out there? muni bonds, something like that, that would pay more than 1-2%????
we are adamant that it be a fixed account and principal cannot be touched.
Thank You!