Annuities - are they good for the investor or the advisor? I have a roll-over IRA from an pension plan and my advisor with UBS want me to invest in American Legacy. I hear annuities are a great alternative to CDs - tax deferral, competitive interest rates, safety rated A+, probate avoidance and other advantages. It would only be a part of my investments, from a third to a quarter. Does it make sense inside of an IRA or is it better for UBS than it is for me? Very rarely does an annuity make sense. IMO inside or outside of an IRA. Usually the most common area of benefit has already been mentioned and doesn't apply for the IRA: tax deferral. Other areas of possible benefits would be creditor-proofing (which an IRA already has) and in the types of insurance protections offered: living benefits and death benefits and step-up benefits for helping with the estate tax burden. In order to get most of these benefits, the annual charges go up correspondingly. The charges will be expressed as percentages (or basis points) of the total principal balance. The added benefits also usually have an extended period that you must own the contract before they kick in (often 7 or 10 years).The big problem I have with annuities is the performance of the funds within them. Because of the drag of the M & E (Mortality and Expense) charges, and then the added charges and then the added charges for the optional coverages, the upside potential is severely curtailed and the downside is greatly magnified.My approach to achieving similar goals to an annuity is twofold: 1). I invest the IRA according to whatever prudent standards I have established for myself.2). If I feel like I want insurance, I go buy that separately.Sad thing today is that far too many "financial advisors" are really nothing more than insurance salesmen. It seems as though most wouldn't know how to engage in determining for themselves the real value (or lack thereof) of an investment if their lives depended on it.My vote on this issue? The broker makes 7% or 8%, while you get the shaft.PosFCF
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