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23

If you're looking for a quick answer about variable annuities, jump down to the Summary and Citations/Resources sections below. My answer is mostly specific to the US. I'll try to give an overview of variable annuities and some of the benefits and drawbacks to them, since they're both heavily marketed and highly complex. The answer is pretty long because ...


22

Annuity is a word that doesn't have one exact meaning, unfortunately. At its very simplest, an immediate annuity (IA) is purchased and you receive a rate that's higher than the market rate in exchange for your money. The cash stream is until you die. For example, today a 65 year old man can get 6.80% by buying the IA. There are a myriad of options for a ...


18

I'm going to discuss this, in general, as specific investment advice isn't allowed here. What type of account is the $60K in now? I mean - Is it in a 401(k), IRA or regular account/CD/money market? You are still working? Does your company offer any kind of matched 401(k)? If so, take advantage of that right up the level they'll match. If not, are you ...


15

This is not the answer you were hoping for. I recommend that you stay out of it and let your parents do what they want with their money. They are obviously very good savers and very thrifty with their money. At this point, they likely have more money than they need for the rest of their lives, even if it doesn't grow. It sounds like your parents are ...


12

It sounds like the kinds of planners you're talking to might be a poor fit, because they are essentially salespersons selling investments for a commission. Some thoughts on finding a financial planner The good kind of financial planner is going to be able to do a comprehensive plan - look at your whole life, goals, and non-investment issues such as ...


10

I'll be blunt. Plan to not retire. Hopefully that didn't hurt too much, but if it did, better now than in 10 years. $60k this late in the game isn't much. Build a side business that will supplement or eventually replace your income at your current careers. If you're good at something, provide it as a service to people who need it. If not, get good at ...


10

You really should consider sitting down with an independent financial advisor to run the numbers for the various options and discuss what risks you're comfortable with and what your requirements/goals are. This isn't a simple decision, unfortunately. Advice I've seen suggested that some portion of the money should stay in the market, earning market rate of ...


9

I believe that the insurance company wants to discourage people from making money by committing suicide. If the insurance company covered suicide for the whole term then a suicidal person with $10,000 could end their life and leave their family $40,000. This not only hurts the company's profitability, but it also (to a very small degree!) encourages people ...


8

In the academic sense, an annuity is payable annually for a term of years and a perpetuity is payable annually forever. An annuity has an end date and a perpetuity does not. Many commonly seen annuities are structured to pay until death of the recipient, which for the issuer can be averaged and anticipated using actuarial tables (i.e. the anticipated ...


8

Using Excel's IRR function and the following cashflows: 10,000 today (age 28) -6,000 annually from age 65 to age 85 (life expectancy) Gives me an IRR of about 5.6% (which means that the 10,000 grows at 5.6% per year for 37 years and needs to continues to grow at that rate to last another 20 years). Which isn't terrible, but with a 40-year investment ...


7

There are broadly two kinds of pension: final salary / defined benefit, and money purchase. The text you quote above, where it talks about "pension" it is referring to a final salary / defined benefit scheme. In this type of scheme you earn a salary of £X during your working life, and you are then entitled to a proportion of £X (the proportion depends on ...


7

Firstly, you should familiarise yourself with your options for your pension fund. They changed as of 6th April 2015 so it's all quite new. The Government's guidance on it is here. If you haven't already taken a tax-free lump sum from your pension fund, you can take up to 25% totally tax free immediately. That makes getting a house for 40K very accessible. ...


7

An IRA is a type of account. It can hold a variety of investments, including stocks, ETFs, or mutual funds. It has a tax favored status, and rules regarding how much you can invest each year. Annuities are insurance products. Different regulations apply. For some people approaching retirement, an immediate annuity may make sense. Other than that type, most ...


7

Move it to a different investment. As you rightly said, annuities are good for the provider, and better for the person making the contract; but not for you. There is no need to pay 10% tax hit - you can move it into another investment, if needed to another institution, and still keep it within an Roth IRA. Just research where you want to go with it, open ...


7

Why is there a difference between the jackpot and the Cash Option - $374 million dollar difference. Taxes aside, suppose you were given a choice of $900 million today or $900 million over 30 years. Obviously you'd take the $900 million today and invest it wisely, earning 10% a year and having much more in the future. You wouldn't just buy mansions and ...


6

The product you seek is called a fixed immediate annuity. You also want to be clear it's inflation adjusted. In the US, the standard fixed annuity for a 40year old male (this is the lowest age I find on the site I use) has a 4.6% return. $6000/ yr means one would pay about $130,000 for this. The cost to include the inflation adder is about 50%, from what I ...


6

To start, not "after taxes". This payout from a lump sum pension is transferable to an IRA, with all the flexibility that affords you: Ability to withdraw at your own pace after 59-1/2, not the fixed payout of the pension. Ability to convert to Roth if you wish, at any time (e.g. in lower bracket years or to 'top off' your bracket as you wish. Ability to ...


6

The decision regarding lump sum and vs annuity will depend on your exact situation, and the market at the time you "retire". It will also depend on how comfortable you are will managing your own investments. If you investing plans were all on autopilot during your career the monthly pension check might be what you are comfortable doing. Factors to consider ...


6

Thirty thousand in credit card debt is a "big elephant to eat" so to speak. But you do it by taking a bite at a time. One positive is that you do not want to borrow from your 401K. Doing so is a horrible idea. The first question you have to ask yourself and understand, is how you accumulated 30K in credit card debt in the first place? Most people get ...


6

First, a Roth is funded with post tax money. The Roth IRA deposit will not offset any tax obligation you might have. The IRA is not an investment, it's an account with a specific set of tax rules that apply to it. If you don't have a brokerage account, I'd suggest you consider a broker that has an office nearby. Schwab, Fidelity, Vanguard are 3 that I ...


6

This sort of investment is legitimate. If it´s a good investment depends on your personal risk-appetite and investment horizon. You basically lower your risk but also lower your average returns over just buying an indexed fund. You basically buy insurance against a downward trend, but that insurance costs you.


5

You can correct it before April 15th (Tax day) without penalty. You'll need to withdraw the portion that is over contributed and a portion of the earnings according to a formula. Your last contribution is the extra contribution, so you'll need to make the withdrawal from the IRA annuity.


5

No, I do not. The advice is to take advice :-) but it is not required. Several "low cost" SIPPs allow an "Execution Only" transfer from some pensions (generally not occupational or defined benefits schemes [where transfers are generally a bad idea anyway] but FAVCs such as mine are ok). Best Invest is one such, and the fees are indeed relatively low. As ...


5

Annuity calculation formulas can be found here. http://en.wikipedia.org/wiki/Annuity_(finance_theory). In addition, as suggested in the comments, there are many sites that have calculators. Having said that, a simple financial mechanism that is followed by many is to invest a portion of the fund in regular income instruments, for example Govt. or corporate ...


5

Your relatively young age and the current very low bond interest rates make annuities a very poor buy. And most of the other suggestions you have mentioned have very low diversification, which exposes you to imprudent risks. Buying shares for dividend income can solve the diversification problem by averaging out your totals as different shares change by ...


5

You could look at it in terms of break even. The annuity pays for itself in 20 months (after you retire) and everything after that is profit. However, that is over-simplifying things somewhat. We all know that a chunk of money today is worth more than the same amount tomorrow, because of inflation and opportunity cost. If you were to take the lump sum now ...


4

Personally, I do asset allocation separately for personal investing and for retirement investing, as I the two have vastly different purposes and I have vastly different goals for each. YMMV depending on how you view your non-retirement investments, and how close you are to retirement.


4

Since your question was first posted, I happened to watch PBS FRONTLINE's The Retirement Gamble, about "America's Retirement Crisis" and the retirement industry. You can watch the entire episode online at the previous link, and it's also available on DVD. Here's a link to the episode transcript. Here's a partial blurb from a post at PBS that announced the ...


4

To answer your question, Retirement Revolution may fit the bill to some extent. I'd also like to address some of the indirect assumptions that were made in your bullet points. I'm convinced that the best way to overcome this is not simply to hold down a good job with COLAs every year, max out your IRA accounts and 401(k)s, invest another 10-20% on top, and ...


4

I wrote a detailed answer about variable annuities on another question, but I want to include one specific situation where a variable annuity may be the right course of action. (For the sake of simplicity, I'm quoting directly from that answer): Three-quarters of US states protect variable annuity assets from creditors. Regular IRA's don't benefit from ...


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