Should my mom buy an annuity?
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Anonymous
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Mom is often preyed upon by others. She is 69 years old and has about $1 million in a retirement account. She has social security, her own health insurance, long term health insurance, a few worthless properties, but not much else. My mom wants to be able to give some money to her daughters when she dies (one daughter has special needs kids). An insurance agent that she doesn't know and has not checked out is trying to sell her an annuity (she went to a dinner he held at some restaurant). Mom's CPA listened to his pitch. His first "plan" left nothing for her children, so she dismissed it out-of-hand. Apparently, the revised plan does. Mom's CPA states that "she doesn't like annuities." Mom is unable to explain the plan, and she doesn't understand it. The guy has pointed to the volatility in the stock market as a reason she should move her money.
The back up "illustration" that he provided her with states: "a total value annuity is a flexible premium deferred fixed index annuity with a Bonus, Surrender Charge, Bonus Recapture and, in most states a market value adjustment (MVA). The Surrender charge, bonus recapture and if applicable, MVA, apply for 10 contract years. She can select amount 4 different types of accounts (Fixed, S&P, transparent value blended, and the annuity linked TVI index. The insurance agent told her that he would give her a 10 percent bonus to add to the account and payout would begin after 3 years. Can you help me - or is there just not enough info to advise me? |
Anonymous
| Find a fee based financial planner and run this by him/her. |
Anonymous
| If someone can't explain it to you very simply, don't buy it. You have to be very careful with annuities. |
Anonymous
| An "immediate annuity" is the only good one. |
Anonymous
| Brokers love to sell annuities because they get big commissions on them. They are a ripoff. |
Anonymous
| I don't know the answer. But the first pay-out is after 3 years. What happens if she gets hit by a bus after one year? |
Anonymous
Not always true, but for a 69 yo woman, I'd be leery about any deferral period. Plus, OP, even if payouts could start after three years, there may be a penalty for taking them before year 7 or 8, for example. |
Anonymous
And don't rely on any "explanation." It doesn't matter what she's told, only what the illustration, policy and written materials state. Op, if your mother can't understand you shodul get involved. |
Anonymous
| $1M will last her fine without paying a fortune for an annuity. Talk to a fee only planner. |
Anonymous
This is correct. Proceed with caution and watch everything she signs. What are the fees? (annual?) Commission to seller? Are their additional fees to invest in mutual fund accounts (known as a "wrap account")? Is there a death benefit? And if you think she's really going thru with it, but Annuities for Dummies or the other one. I did. |
Anonymous
| Op, It is not possible to answer without your mothers financial picture. Probably not a good idea, but maybe. What are her financial goals? |
Anonymous
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Thank you so much for all of this helpful information. Unfortunately it is difficult to talk my mom out of this, but I will continue to try. Her only financial goal is to make the $1 million (which is currently invested in mutual funds via T Rowe Price ) last until she dies and hopefully she will have some left over for heirs. She is not in the best of health (has had cancer and is diabetic and obese). She is worried about a decline in the stock market and how that will affect her $1 million.
But why should she take money out of her T Rowe Price account and invest in an annuity invested (the guy said commodities) or other mutual funds ? Just doesn't pass the smell test. |
Anonymous
| if she is afraid of another stock crash, cant she invest in bonds? |
Anonymous
| Mmm. Doesn't sound good. |
Anonymous
| never buy annuities -- they are all ripoffs |