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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76075  
Subject: Re: Professionally Managed versus Self Directed Date: 12/16/2011 9:20 AM
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1) Generally speaking now is a wonderful time to get a home mortgage because interest rates and inflation are both low. For the various types of annuities the current interest rates are usually a major factor in how much they pay. Just like getting a mortgage looks good right now; the flip side is that it is a rough time to buy an annuity. Depending on the details of the annuity you could be clobbered if (when) interest rates and inflation go up.

Why is this relevant for a variable annuity? I can see how it would be for a fixed but not a variable.

5) Cost are critical. Often the stated cost does not include many legally hidden fees and costs. At the age of 65 the "safe withdrawal rate" (SWR) that you can start withdrawing from your portfolio and have a good chance of not outliving your money is around 4% (there are various assumptions and opinions about this. ) The problem is that if you are paying 1.5% in known fees and another 0.5% in hidden fees then that is 2% a year or half of you spendable money each year. It is worse for you because you are younger so your SWR is probably closer to 3% so they would be taking two thirds of you money each year with 2% in fees.

SWR is not as relevant as the only reason to buy a VA with retirement dollars (IMO) would be to put on a rider of guaranteed income. Those guarantess would be higher than the traditional SWR, net of fees.

7) 7) 1% of your portfolio could be a significant amount each year. Even at $200 an hour you can likely buy a lot a lot of one on one time with a fee only financial advisor who can help you without being biased to put you in high commission products.

All that advice isn't going to do you much good if your holdings are taking a beating. Here is a new flash - even fee-only advisors get it wrong (e.g. 2008 & 2009). Paying less fees is in not necessarily coorelated to either getting better advice or getting a better return.
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