Hello....I am about to invest $500k split between variable and fixed Hartford Annunities. The fixed is paying 4.6%, and invests almost all in American Funds which I have had forever and perform very well. The variable has quite a high up front fee....2% of 250k. I see Vanguards is lower....but Vanguards customer service seems to be a question for some on these boards. I also plan on investing in some bonds...here in Cal-e-for-nya.....(that is Arnold's translation). However, with the possible looming interest rate increase, that may not be wise.
Anyone have any comments about Hartford? Calif Bonds....etc...or other suggestions? Husband and I are 45 yrs old, 2M in cash flow, and would like to retire by 55-60 yrs. Still plan to be gainfully employed till 55 or so with about $125,000 annually.

Still plan to be gainfully employed till 55 or so with about $125,000 annually.

>>>>>Annuties are subject to a 10% penalty if they are not held to age 59 1/2. Plus you lose any LTCG with them. Plus they have high annual fees. Finally there is not stepup in basis at death.


The fixed is paying 4.6%, and invests almost all in American Funds which I have had forever and perform very well.

>>>>>> I did not look at the prospectus but fixed annuities generally are not invested in mutual funds, variable are, however.

>>>>>>I would be very cautious about investing in annuities. Given the amount of money you are spending I would certainly get a second opinion. Preferably from someone who is not selling annuities.

buzman

The fixed is paying 4.6%, and invests almost all in American Funds which I have had forever and perform very well. The variable has quite a high up front fee....2% of 250k.

As I understand annuities, you're paying an insurance company to guarantee a return payment. Currently, you could ladder 5 year CDs an pretty much get 4.6%, plus keep control of your principle. Also, when rates go up and CDs mature, you get a higher rate of return. Die tomorrow, insurance company keeps your principle. In CDs, your estate keeps the money.

JLC

<< Hello....I am about to invest $500k split between variable and fixed Hartford Annunities. The fixed is paying 4.6%, and invests almost all in American Funds which I have had forever and perform very well. >>

I'm not sure I understand you're use of “fixed” since a Fixed Annuity in actually invested in the insurance company's general account. . . .????

<< The variable has quite a high up front fee....2% of 250k. I see Vanguards is lower....but Vanguards customer service seems to be a question for some on these boards. I also plan on investing in some bonds...here in Cal-e-for-nya.....(that is Arnold's translation). However, with the possible looming interest rate increase, that may not be wise. >>

I feel what you may want to focus more on are any of the riders that can reduce your investment risk. Hartford has some good guarantees that Vanguard does not have (as yet as far as I know).

<< Anyone have any comments about Hartford? Calif Bonds....etc...or other suggestions? >>

Hartford is a very good company and provides very good annuities of various types. And they have been very creative in developing excellent riders for variable annuities that can reduce the investment risk that variable annuities have had in the past.

<< Husband and I are 45 yrs old, 2M in cash flow, and would like to retire by 55-60 yrs. Still plan to be gainfully employed till 55 or so with about $125,000 annually. >>

At these age brackets . . . I feel it's well worth looking into variable annuities with the riders that guarantee principle. Yes, of course there's some cost there. But when you evaluate risk vs. return issues, these annuities with these riders can be very attractive (contrary to most opinions on these boards <grin>).

JLC, writes:

<< As I understand annuities, you're paying an insurance company to guarantee a return payment. Currently, you could ladder 5 year CDs an pretty much get 4.6%, plus keep control of your principle. >>

That's correct.

<< Also, when rates go up and CDs mature, you get a higher rate of return. Die tomorrow, insurance company keeps your principle. In CDs, your estate keeps the money. >>

This is NOT correct.

There are may ways to set up an immediate annuity and there's really only one of the may ways that would result in the insurance keeping the principle. That is when one chooses a life income option with no certain period.

busman, you wrote:

<< >>>>>Annuties are subject to a 10% penalty if they are not held to age 59 1/2. Plus you lose any LTCG with them. Plus they have high annual fees. Finally there is not stepup in basis at death. >>

GOOD point. I feel that's definitely an issue that should be looked at very closely.


<< >>>>>> I did not look at the prospectus but fixed annuities generally are not invested in mutual funds, variable are, however. >>

You're correct. Fixed annuities do not have “separate accounts” and are not invested in mutual funds. They are invested in the insurance company's general account.

However, variable annuities very often DO have fixed account investment options. But with the overriding expenses of a variable annuity, I don't know why anyone would want to much in such a position.

<< >>>>>>I would be very cautious about investing in annuities. Given the amount of money you are spending I would certainly get a second opinion. Preferably from someone who is not selling annuities. >>

Unfortunately, it's very hard to find a good expert on annuities who does not sell them. For example, I would suggest that MOST fee-only CFP's only know the basics are hardly a match for someone who directly deals with them on a daily basis.

Hmm....these are all good suggestions. I am concerned about one thing though....the pricipal at death. It can be set up for benificiary, or I believe put back into the estate. Not sure but I will check.

These are all good questions to ask. I trust the advisor that I have...yes she is making a fee from the Insurance company, and I am paying up front for variable...but I think if I am comfortable that she will continue to watch my portfolio....and I am spending a little more in 'fees' for someone I trust, I guess the upcharge might be ok if the return and customer service is worth it.

Any more questions to ask or more 'red flags' to watch out for before I sign on the dotted line? This is rather scary!

Wlombo, you asked:

<< Hmm....these are all good suggestions. I am concerned about one thing though....the pricipal at death. It can be set up for benificiary, or I believe put back into the estate. Not sure but I will check. >>

The principal can be guaranteed against any investment loss through the addition of a rider. So, you will want to discuss this in detail with your advisor(s). For an immediate annuity where you're receiving an income, the principal can also be protected when you select a “Period Certain” option. This too should be discussed in some detail with your advisor(s).

<< These are all good questions to ask. I trust the advisor that I have...yes she is making a fee from the Insurance company, and I am paying up front for variable...but I think if I am comfortable that she will continue to watch my portfolio....and I am spending a little more in 'fees' for someone I trust, I guess the upcharge might be ok if the return and customer service is worth it.

Any more questions to ask or more 'red flags' to watch out for before I sign on the dotted line? This is rather scary! >>

If you and this advisor have not been discussing the estate planning issues, then you'd better find a good experienced advisor who you can discuss this with BEFORE you sign on the dotted line. Annuities are not good vehicles to leave to heirs. And if setting aside something for heirs is a particular issue, then looking at a permanent life insurance contract as part of this plan may be may be in order instead of one of the annuities (because of the death benefit leverage).

Be sure to take your time, there's not rush when it comes to this kind of thing. It's your money and you'll want to have a reasonably good plan in place that can achieve what you expect.

Remember this too when it comes to planning . . . give any 10 planners/advisors exactly the same set of issues and data and you'll get 11 different plans. The 11th being the one you finally settle on.

I trust the advisor that I have...yes she is making a fee from the Insurance company, and I am paying up front for variable...but I think if I am comfortable that she will continue to watch my portfolio....and I am spending a little more in 'fees' for someone I trust, I guess the upcharge might be ok if the return and customer service is worth it.

Just be aware that this trustworthy person you're talking about is the one who's getting that 2.5% up-front fee on the variable annuity, but if you're comfortable with that, then you already have your answer.

I don't know anything about Hartford, but I have a variable annuity with Fidelity and there was no up-front fee. Also ask about surrender fees, I don't believe Fidelity has them either.

2old