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Old 02-25-2008, 12:43 PM
 
1,861 posts, read 3,024,986 times
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Maybe somebody knows something about this.

I put in $200/month (all I can afford, and sometimes, even less) in a tax-sheltered annuity at work. So, I do better on taxes because it decreases my salary a bit.

Anyway, I called the company (Vanguard) one day, because on my summary sheet, it said that if I continue to put $200/month in for the next 9 years until my retirement (at 66), I will draw $144/month. That's because they spread it out over 15-20 years.

Is this something that is worth continuing, or is there something better? It seems kind of worthless to me - what's $144/month minus taxes going to be, and will it help me during retirement?

Thanks for any information.
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Old 02-26-2008, 07:43 PM
 
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Cousinsal,

There are various annuity calculators on the web which are easy to use and understand. You can plug in your monthly or annual contributions, total accumulation for the 9 years, and also estimate the annual growth (for example, 4%, 5%, 6%, etc). In today's world, I would stay on the conservative side when estimating growth over 10-20 years. Just Google "Annuity calculators." Also several websites have retirement calculators, which are good for overall estimates, though everyone's situation is different and it pays to do a more careful individual analysis to get more personalized information. The calculators are good for estimates, however. An annuity would be one part of a retirement plan.

As far as whether or not an annuity is the best investment vehicle for your savings, that's a good question for a financial professional. Your annuity is likely part of your retirement planning and a professional can give you advice based on all of your assets. In general, riskier investments may yield greater returns, but also greater losses when things go into the tank. All investments are a risk, it's just a matter of how much risk you can tolerate based on your goals. Otherwise, you can put your $200/month under your pillow to avoid investment risk, but inflation will decrease the value of your cash over time, if it's not invested with the potential for some growth.
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Old 02-27-2008, 09:44 AM
 
1,861 posts, read 3,024,986 times
Reputation: 559
Quote:
Originally Posted by xz2y View Post
Cousinsal,

There are various annuity calculators on the web which are easy to use and understand. You can plug in your monthly or annual contributions, total accumulation for the 9 years, and also estimate the annual growth (for example, 4%, 5%, 6%, etc). In today's world, I would stay on the conservative side when estimating growth over 10-20 years. Just Google "Annuity calculators." Also several websites have retirement calculators, which are good for overall estimates, though everyone's situation is different and it pays to do a more careful individual analysis to get more personalized information. The calculators are good for estimates, however. An annuity would be one part of a retirement plan.

As far as whether or not an annuity is the best investment vehicle for your savings, that's a good question for a financial professional. Your annuity is likely part of your retirement planning and a professional can give you advice based on all of your assets. In general, riskier investments may yield greater returns, but also greater losses when things go into the tank. All investments are a risk, it's just a matter of how much risk you can tolerate based on your goals. Otherwise, you can put your $200/month under your pillow to avoid investment risk, but inflation will decrease the value of your cash over time, if it's not invested with the potential for some growth.
Thanks a lot for the answer! I have ss and a pension, but I wanted to at least put something away, but it sure doesn't seem like much. As a matter of fact, I lost money in the annuity this past year!
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