Variable Annuity Rate
Variable Annuity Rate
What do you think of this radical move?
Last year, I had a stock-based 401K – and you know what the stock market is doing right now. I also had a Traditional and Roth IRA which was paying an astronomical 1.2% interest. My Edward Jones advisor told me about a John Hancock annuity which was paying 7%. It’s one of those variable annuities that can’t go down, but can only go up when the market improves. I moved all my retirement savings into this annuity. Since then, the stock market has done MUCH worse. The basic value of the annuity has dropped, but I still am guaranteed to collect a certain amount by the time I turn 59 1/2, no matter what happens. It sounds to me like I did the right thing, rather than watch my stocks dwindle to nothing and be stuck with outrageously low interest rates. What do you guys think? Is this too good to be true?
I sure hope he didn’t advise you to put a tax deferred variable annuity in an already tax deferred retirement plan.
Who is going to guarantee the annuity if the insurance company goes under?
The fees and cost associated with annuities are high. I would rather have done this:
1. S&P 500 Index
2. Dollar Cost Average Bi-Monthly
3. Do this in a Roth IRA.
4. Repeat and wait 15-20 years.
The only time I have suggested varr annuities to past clients was if the client had a maturing whole life policy that they brought over to me (1035 tax free exchange) to defer taxes further, or if the client was in a tax nightmare situation and wanted growth tax deferred and had a large sum of cash that they needed to defer after maxing out all retirement options.
You have 10-30 days (depending on the contract) to change your mind.
“Free Look Period”
http://www.sec.gov/answers/freelook.htm
Variable Annuities: Saving For Retirement While Keeping Your Options Open
If you’re planning your investments for retirement, consider using variable annuities as part of your retirement program. Variable annuities offer the diversification so necessary for a truly safe retirement savings but also have some guarantees that may be perfect for your needs. Of course, like any good program, you don’t necessarily make it the only investment you use for retirement. However, since each variable contains all the asset classes necessary for a balanced program, you’ll find that variable annuities are suitable for a large portion of your retirement assets.
Variable annuities often contain mutual funds of all types and from a variety of companies. Some of the newer products also contain funds in various asset categories including sector funds. Sector funds are specialty funds that target special sector in the economy, such as technology or banking. Other mutual funds also contain specialty funds like gold or precious metals. You can tell that there’s a broad selection from which to choose.
In today’s economy, it’s difficult to know whom to trust. It seems no matter how large the company, they accept a bailout check from the government. That’s one advantage of a variable annuity. While the company that sells the variable should have a strong rating, the company doesn’t invest the money in its general fund but with many different mutual fund companies.
The diversification of the companies that hold your assets is another benefit of a variable annuity not found in mutual funds. The chances you losing your assets if of any of these companies sink is small since both insurance companies and security companies have protection similar to the FDIC, but it does help you sleep better to know that you’ve didn’t put all your eggs in one basket.
Variable annuities offer some guarantees that might be perfect for the person that wants an income from their policy. The guarantees for these people are the living benefits. Many of the companies offer the living benefits for an additional fraction of a percent of you account balance.
Some of the living benefits vary from a guaranteed return of your principal or higher, no matter what the market does or how your account fluctuates. Others guarantee that you’ll always have a specific return, such as 5 to 7 percent, as long as you take a cash stream no larger than that percentage. If you pull out a lump sum, all guarantees of this type cancel.
The living benefits are perfect for specific situations. If, however, you’re one of the lucky people that don’t need to use any of the assets in retirement but simply want to pass the funds to heirs, there are death benefit guarantees to add to policies. Death benefit guarantees vary from a guaranteed return of principal to a guaranteed growth percentage per year. Like the living benefits, death benefit guarantees cost a percentage of your contract value on an annual basis.
As you can tell, variable annuities aren’t simple contracts. In order to find the best one with the appropriate provisions for your situation, it’s important to talk to an annuity specialist or seek information online. The selection is broad a varied, so don’t sign up for the first policy you see. Take time to investigate this important asset. Variable annuities can be a huge benefit to your retirement years if you choose on that fits your situation.
Broker/Dealers – Going Independent – Registered Reps.
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