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Author: jenkinra Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76082  
Subject: Annuity Expenses Date: 8/30/2000 6:08 PM
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Hello. I'm a 58 year old early retiree with $400K + in my old 401K, which has been doing well. I have been looking at the Polaris variable annuity by Anchor National (Sun America) as a possible rollover IRA, but am concerned with the advertised expenses, especially since reading your recent series on annuities. The basic annual account expenses (mortality and expense risk and distribution expense charges) are 1.52%, slightly above average. Examples of the sub-accounts however, based on a $1,000 investment, and assuming a 5% annual return on assets, show an average annual cost of $23 or $93, depending upon whether a). you surrender the contract at the end of the stated time period, or b). you do not surrender the contract. If all of these are added then the annual total expense would be considerable, would it not?. They offer a 4% bonus to your account if you commit to a longer contract period, but it looks to me like this would be wiped out by the expenses at the end of the first year. And of course, the expenses continue and each year would theoretically be based upon a larger base. Any general advice or recommendation? I can keep my 401K in any event, but since retiring have less control of it. Thanks in advance.
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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 24500 of 76082
Subject: Re: Annuity Expenses Date: 8/31/2000 12:39 AM
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jenkinra, you asked:

<< Hello. I'm a 58 year old early retiree with $400K + in my old 401K, which has been doing well. I have been looking at the Polaris variable annuity by Anchor National (Sun America) as a possible rollover IRA, but am concerned with the advertised expenses, especially since reading your recent series on annuities. The basic annual account expenses (mortality and expense risk and distribution expense charges) are 1.52%, slightly above average. Examples of the sub-accounts however, based on a $1,000 investment, and assuming a 5% annual return on assets, show an average annual cost of $23 or $93, depending upon whether a). you surrender the contract at the end of the stated time period, or b). you do not surrender the contract. If all of these are added then the annual total expense would be considerable, would it not?. They offer a 4% bonus to your account if you commit to a longer contract period, but it looks to me like this would be wiped out by the expenses at the end of the first year. And of course, the expenses continue and each year would theoretically be based upon a larger base. Any general advice or recommendation? I can keep my 401K in any event, but since retiring have less control of it. >>

WHY . . . . would you want to roll over your 401(k) into an IRA with an ANNUITY!!??? Just because they're offering a 4% bonus?

There needs to be much, much more information about your financial situation long with your retirement goals and objectives before ANYONE can really offer up much of anything that might be appropriate. If you're not used to investing and/or doing your own planning, you might want to serious consider reading a couple of good "financial planning" books first (maybe like Ernst & Young's Retirement Planning Guide) . . .??? Then once you get a handle on a few things, you may want a little help from a professional to get you launched on your retirement.

As you do this, you might consider that if you'd like more control over what you invest in, then rolling over your 401(k) into an IRA would be the thing for you to do. Then the issue is . . . just what investments are you going to use inside of that IRA - could be a Variable Annuity (not really the best of choices in a large majority of cases) - could use an asset allocation of mutual funds - could use an immediate annuity to guarantee an income for a 5 year period and invest relatively aggressive in a select set of stock (not mutual funds) to maximize growth if you feel you need or want more income - could put it all into an Immediate Variable Annuity where you will have an income that can grow and one that you CAN'T outlive - could . . .????? What's the best choice for YOU really DEPENDS on a detailed analysis of your situation and your goals. Just remember, you don't have to rush to make this decision and whatever decision you make isn't going to be the last one regarding what you do for retirement.


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