Best place to invest 100K-200K (annuity, bonds, broker, mutual fund)

[A_Better_Bronx_2morrow]

My broker just presented to me a new 7 year annuity thats paying 6.05% guaranteed for 3 years. After the 3 years it will be whatever market rate is at the time for the remaining 4 years.

I have between 100K-200K to invest so I need to know if this is a good deal and if its the best place for me to invest my money in to get a respectable return or is there something else out there thats better than the annuity I was offered.

My concern is that I'm not too crazy about tieing up my money for 7 years. Is there a better way?

[chet everett]

First, read the FINE PRINT. Are you sure that they are guaranteeing that return AND YOUR PRINCIPAL. Yep, the whole complaint of certain classes of variable annuities is that your principal COULD decline. Even if that is not the case, the idea of gross index annuities is that if the market is not going to make up for those years of 'guaranteed' 6% by rising, they will pay a depressed rate (all the way to zero, if they need to...) to make up the difference.

ALSO, what, if any, compounding is there on the annuity. Often times the "locked in rate" of 6% is beat HANDILY by a simple CD at 3.5% that is compounded on regualr basis over the WHOLE 7 years...

What are the surrender charges? What is the stregnth of the insurance company issuing this annuity?

It is all in the details. If the answers to these questions match what your expectations are, this could be a good deal, but please do not go into thinking there is some 'magic' to this, and do not do it to capture ONLY an upfront premium rate. If there any possibility that you will need that money BEFORE seven years you will not be happy.

Good Luck!

[golfgod]

I've NEVER seen an annuity that was a good investment! Forget about the "guaranteed rate" carp and ask him this question; "If I buy this 'investment' today for $100K and sell it TOMORROW, how much will I get back?"

That will give you an idea of how much his commission is. And don't let him put you off with the "why would you want to get out of a long term investment that quickly?"

In my experience annuities are HEAVILY COMMISSIONED (nothing wrong with that, I was a commission salesman my entire working life), and the commissions are FRONT END LOADED. This generally makes them a very bad investment.

Study up on MUTUAL FUND investing. You should not be in individual stocks. Pick a balance of 4-7 types of funds within a no load fund family and do your own investing. You'll at least equal the market!

golfgod

[pont neuf]

I would put some of the money in CD's in a foreign currency with a US bank.

[Humanoid]

If you want to do something short term with the money just put it in a CD, things are rather volatile right now so you can easily get burned (short term) in almost anything right now (even government bonds).

Just make sure you are within your FDIC limits, currently its 250k but it could change make to 100k sooner or later.

[FarNorthDallas]

Skip the annuity. Diversify it - CD's, stocks, bonds and whatever else. Gold, maybe? Don't put it all in one place doing one thing.

[A_Better_Bronx_2morrow]

Thanks guys for the advise. The company who is offering this annuity is New York Life. It's a 7 year compounded annuity commitment. First 3 years are guaranteed at 6.05%. After the 3 year it goes down to whatever the rate is at the time. They allow you to take out I think 10% or 15% a year without any penalities. I'll post more detail of this annuity as soon as I find out more from the broker.

What questions should I ask him about the annuity that will determine if its a good deal. I will pass along all the questions to him and then post the answers here and you guys can tell me if its a good deal or not.

[FarNorthDallas]

Ask him what you tax liability will be after you get the money back in 7 years.

[killer2021]

save it and buy a house in 2011 when we hit the bottom. You'll probably be able to buy a place with straight cash seeing how things are playing out.

[Compression]

I'd agree with killer, Right now, the best place to invest cash, is into your mattress. Then stake out a nice waiting position in the bushes, and wait to pounce.