City-Data Forum Annuity, think of investing (bonds, IRAs, mutual funds, creditors)
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03-14-2009, 08:24 PM
 1,627 posts, read 2,725,934 times Reputation: 2056

I have some money to invest but I am staying clear of the stock market.

I want to invest into a annuity for various reasons

1) Better interest rates than CD's
2) Deferred taxes, only what you take out.

What annuity would you suggest?

03-14-2009, 11:43 PM
 3,553 posts, read 6,927,098 times Reputation: 2314
Quote:
 Deferred taxes, only what you take out.
The same is true for ANY invsetment!

I've NEVER seen an annuity that made sense. Not once! Not when I was in my 20s, or 30s, or 40s or 50s. I'm 60 now and still not seen one!

Annuities ARE VERY HEAVILY COMPENSATED. That is the person who SELLS THEM is paid very well for doing so!

Before you buy ANY INVESTMENT ask the person selling it the following question:

If I buy it today for (fill in amount of purchase price here) \$1,000 for example, and sell it TOMORROW, how much money will I get for that sale?

Take the difference between the BUY and SELL prices, divide it by the PURCHASE PRICE. That is your DAILY PERCENT OF LOSS. Take the percent (as a whole number) and multiply it by 365, that is your ANNUAL RATE OF LOSS.

For example, you buy for \$1,000 and sell of \$990. That's \$10.00 divided by \$1,000, which is .01 or ONE PERCENT PER DAY. Multiply 1 by 365 and you'll see that YOU'RE LOSING MONEY AT AN ANNUAL RATE OF 365%.

IMO you'd be better off taking the money to Vegas and putting it all down on Red!

golfgo

03-15-2009, 05:29 AM
 1,403 posts, read 3,122,605 times Reputation: 1310
+1 to golfgod

Although I don't know your exact financial situation chances are that an annuity would be the WRONG move for you as annuities are the wrong move for 99.9% of people out there. The reason is that IRAs offer similar tax-deferred or tax-free growth with lower fees and more transparency (one problem with annuities is that they aren't required to provide fee information to you, IIRC).

Another guess is that somebody is trying to sell that annuity to you. Whoever that is will make something like a \$10,000 commission for getting you signed up. That is why they are pushing that annuity. Gotta ask yourself why an annuity company needs to dole out a commission like that to get people into annuities!

FWIW, I would steer clear of that financial advisor who is pushing that annuity on you as it sounds like they do not have your best interests in mind. That is unless you are are that 0.01% of the population. You need to read up and decide for yourself.

As for alternative investments, providing some more information (age, financial situation, other investments, debt) might help the folks on this forum suggest somethings to do with your money...good luck!

03-15-2009, 11:56 AM
 Location: Aloverton 6,564 posts, read 12,271,399 times Reputation: 10009
If you want to achieve the same result as an annuity, buy high-grade corporate bonds. Then project the difference in performance between about a 9% return and the bonds, and write a check for that amount to the insurance/annuity company each year as a donation. You'll have put out the same amount of money, gotten the same approximate result, and you'll have boiled the annuity equation down to something resembling the reality of the situation.

Nearly everyone with any investing savvy hates annuities, because they are so often sold to elderly people using great slathers of FUD, and if there's a more hateful crime than ripping off the elderly I'd be challenged to think of it. I've posted before that if someone starts showing up around my aging mother trying to sell her annuities, he'll one day find me blocking his path very strongly implying that this course of action is career- and mobility-limiting.

Put another way: if there's a day where I had a flat tire, couldn't find my checkbook, had to use the restroom and couldn't find one for an hour, left my cold coke in a hot car, ruined my new jacket with a cigar burn, and talked a decent human being out of an annuity, that was still a good day.

03-15-2009, 11:16 PM
 1,627 posts, read 2,725,934 times Reputation: 2056
Here is my portfolio:
A) I Have 5 CD's paying 3.5 percent to 4 percent.
B)I have two annuities, one paying 7.2 percent, doubled our money on the first one.
C)3 corporate bonds, 1. NY Mellon bank, 2. Principle Life 3. Bank of America (down 60 percent)
D) Mutual Funds, (down 35 pecent)
E) Federal Mortgage Bond

If i have a annuity, would not need to touch it for five years, lets say. I don't have to pay any interest on the money occured.

03-16-2009, 09:31 AM
 1,403 posts, read 3,122,605 times Reputation: 1310
Quote:
 Originally Posted by smilinpretty Here is my portfolio: A) I Have 5 CD's paying 3.5 percent to 4 percent. B)I have two annuities, one paying 7.2 percent, doubled our money on the first one. C)3 corporate bonds, 1. NY Mellon bank, 2. Principle Life 3. Bank of America (down 60 percent) D) Mutual Funds, (down 35 pecent) E) Federal Mortgage Bond If i have a annuity, would not need to touch it for five years, lets say. I don't have to pay any interest on the money occured.

Hey, whatever works for you. My question for you is: You have that annuity earning you 7.2%....but how much is it costing you in fees and expense ratios? Again, I don't think annuities are regulated by the SEC like other investment instruments and so they aren't required to tell you what you pay to have your money in them.

It was mentioned before but I'll mention it again....many different investment vehicles offer not having to pay taxes on the money you accumulate in them...IRAs offer that, and I'm willing to bet at a lower fee and expense ratios than that annuity.

03-19-2009, 02:49 PM
 Location: SE MO 231 posts, read 568,557 times Reputation: 156
Quote:
 Originally Posted by smilinpretty I have some money to invest but I am staying clear of the stock market. I want to invest into a annuity for various reasons 1) Better interest rates than CD's 2) Deferred taxes, only what you take out. What annuity would you suggest?
So many posters, so little knowledge. The reasons you state for investing in an annuity are valid and realistic. You can easily acquire a saving annuity (deferred annuity) with no loads, no commissions, no fees and no salesman from Vanguard, Fidelity or USAA. USAA has (today) a 10 saving annuity with a guaranteed interest rate of 5.50% (\$100,000+). You give them \$100k and 10 years later they give you \$173k. Surrender charges will apply for early withdrawals, read details on their Web site. Shorter periods and lessor amounts are available with reduced guaranteed rates. Vanguard and Fidelity have comparible products and all three are quality companies. Can you do better in another investment? Maybe. Can you do worst? Absolutely.

There is no reason why an annuity cannot be a part of a investment portfolio. With guaranteed returns, it can form a cornerstone of a well designed portfolio. An annuity is also the only investment product that allows for unlimited annual contributions and (depends on the state) be sheltered from creditors. Folks with higher incomes know this and use annuities to protect money assets should things not work out exactly as they had in mind.
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