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Author: jesserivera67 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Did my parents get burned? Date: 9/7/2003 1:07 PM
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My parents are 58 and 52 and I'm very worried about where they currently stashed their retirement savings. A couple of years ago they received a recommendation from an accountant to speak with some guy from American Express. They did so and figured they had better get into the market since they wanted to retire somewhat soon. They know it may be late but some return is better than none.

The guy sold them a variable annuity, cash value variable universal life insurance, and a SEP-IRA (dad has his own business). Most of everything I've read says, with the exception of the SEP-IRA, that this was a bad call. They're 2 years into the annuity which tells me the fees to get out will be very high. Here's their breakdown...

Variable Annuity (dad)- $54k
Variable Annuity, SEP IRA (dad)- $42k
Variable Annuity, Rollover IRA (mom)- $19k
Variable Annuity, SEP IRA (mom) - $26k

You may notice that I put "Variable Annuity" in front of anything which is how the statement looks. I'm not sure what this means but I think this guy rolled their IRA's into the annuity, which from what I've read is a major mistake.

Then they have another account American Express calls, "Custodial Money Purchase Plan" in which they have:

Variable Annuity (dad) - $20k
Variable Annuity (mom) - $ 9k

Then I looked at the investments...I'm sure it won't surprise anyone that every single investment is an American Express fund of which I'm sure this financial advisor is making a killing off of. A quick look showed that each fund primarily invests in the large cap financial sector which I think means that not only are they not truly diversified but very heavy into sector investing. At their age I think this is way to much risk.

They told me they had a couple of 401k's that have stayed put (about $170k) I told them to do nothing with it until I do some research and to definitely not give it to this "financial advisor".

My recommendation was going to be to stop investing anything with American Express and open up an account with Vanguard. My thought is to set them up with a 60/40 portfolio that should get them some return over the next 10 years with reasonable risk. I'm just not sure of the implications on the American Express account. Can they open another SEP-IRA and then not invest anymore in the original one?

Not sure if I'm being too hard on this "financial advisor" (btw he's not registered at NAPFA, FPANET, or SEC) but this doesn't feel right to me.

Am I directing them correctly? Any other suggestions would be hugely helpful. I'm really worried about them and want to help.



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