Should my mom buy an annuity?
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Anonymous
| Doesnt she have a financial planner already? At least a tax atty? If not get one. |
Anonymous
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Immediate annuities are like insurance for long life expectancy-- if your mom is concerned about outliving her money she could purchase a guaranteed income stream. If she lives longer than expected, she still collects, but if she dies sooner then her heirs don't get a refund.
She may not like this because it doesn't leave money to her kids. However, a deferred variable annuity is very rarely a good idea. I used to hang out with annuity salesmen and they make a ton of money off commissions because once you buy there are a lot of hidden fees. |
Anonymous
| She definitely needs a good fee-only financial planner who is familiar with setting things up for special needs relatives. After investigating annuities carefully, she may want to spend SOME (not all) of her savings on one. If she has rental properties in addition to Social Security, those hopefully will provide a good enough baseline annual income without buying an annuity. |
Anonymous
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Avoid it. The selling point from the salesman is it cushions her from market volatility? There's a better way to do that -- change which funds you are invested in. At her age and given her health, she should probably be invested in low-risk investments (bonds) and not the equity market anyway.
She needs to get to a financial planner right away. She should probably set up a special needs trust (special tax treatment) for her grandchild, and maybe even look at gifting to her children the maximum tax-free allowed ($13k I think?) per year. |
Anonymous
| Oh also here's how to "sell" this to your mother. Tell her about the huge estate taxes (30%+) and how that will cut into what her heirs receive more than any market fluctuations, so that's why she should see a financial plannner. Then, the planner will talk her out of the annuity for you. |
Anonymous
| Sure you can buy annuity. Before that you need to know about how insurance company selling annuity to their customers. There some terms and condition of annuity and make sure that your agreements are legally registered. If you sell annuity payments the buyer will pay you in lump sum or in installment. |
Anonymous
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I think there is one caveat to the "all annuities are rip-offs", which is that simple immediate annuities can be a good idea.
In this case though, the lady is clearly being scammed. the best value immediate annuities don't employ high-pressure sales techniques. I recommend researching this topic on bogleheads.com |
Anonymous
| from CNN Money: ... While annuities can be useful retirement planning tools, they can also be a lousy investment choice for certain people because of their notoriously high expenses. Financial planners and insurance salesmen will frequently try to steer seniors or other people in various stages toward retirement into annuities. Anyone who considers an annuity should research it thoroughly first, before deciding whether it's an appropriate investment for someone in their situation. |
Anonymous
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Don't do it - there's usually an 8 percent or so commission that goes along with it, no guarantees, and it's unclear from what you've written when she will get money. Also, depending on the annuity, there will be nothing left once she dies - it all goes to the company (unless there is a survivor benefit). How is her health? Is any of her money in an IRA? Sometimes it can make sense for someone to have an annuity for tax purposes - but usually only if they are ultra-wealthy (net worth $10 million+).
The brochure sounds like it's written in gobbledy-gook. This is a red flag - stay away. |
Anonymous
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Run a thousand miles from this broker, at top speed. Ten thousand miles if you can. The only one getting any kind of bonus here is the scum selling the product.
SPIAs, which are imediate annuities are useful for people with no dependants in fear of outliving their money Any other kind of annuity is only good for the sort of insurance agent who drums up business by luring elderly people with free food. With a million dollars your mom could put it all in Vanguard Wellesley admiral shares and collect $8k a quarter just by harvesting dividends- her capital wouldn't have to be touched! Here's a retirement calculator showing what she would end up with after 25 years of investing in a Wellesley type fund with an inflation adjusted $30k a year withdrawal rate. Click here to stop your mom getting scammed by a scumbag annuity salesman Go about halfway down the page and hit the "submit" button under where it says "Start Here". I already set up the parameters for you. Invested and withdrawing in such a way, your Mother has zero chance of running out cash before the age of 94, and at age 94 will be left with anywhere between $500,000 and $4 million  with the average coming out to a million and a half.
Arrange a meeting to show her and her CPA these numbers. I know from experience parents are often more willing to listen to "professionals" than their kids, so hopefully having the CPA there will counter SCUMBAG BROKER in her mind. |
Anonymous
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If your Mom desires the simplicity of annuity then she might like the idea of a Managed Payout Fund.
[url=http://www.mrmoneymustache.com/2012/07/30/managed-payout-funds-automatic-grocery-buying-machines-for-the-early-retiree[Here[/url] is an article explaining the concept. It's a bit riskier then just chucking it all into Wellesley, but she wouldn't have to deal with reinvesting dividends or selling shares. Like and annuity, Vanguard would just cut her a check once a month. Unlike an annuity, it would be dead simple to remove her remaining principle should she become unhappy with the fund. |
Anonymous
Dang. Here is an article explaining the concept. |
Anonymous
| Here are the firecalc numbers for investing in VPGFX Vanguard managed payout fund. This would give her a monthly income of slightly over two grand a month. |
Anonymous
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agree with all who say run away ... in a decently diversified low expense fund like a Vanguard fund she can draw $32-40k a year out of her $1M (based on a traditional conservative 3-4% annual draw) and likely never run out of funds, plus remainder can go to kids/grandkids.
I don't trust most annuities and even on top of the other risk factors there's the risk of the underwriter going out of business during the course of the payout, taking your principal with them ... |
Anonymous
| Honestly, this may be the most helpful thread i've ever read on this site. you are getting good advice. |