UnThreaded | Threaded | Whole Thread (15) | Ignore Thread Prev | Next
Author: Fuskie Big funky green star, 20000 posts Top Favorite Fools Old School Fool Ticker Guide SC1 Red Winner of the 2010 Rule Breakers Challenge Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75626  
Subject: Re: AXA Equitable Asset Mgt Investment Date: 6/6/2005 5:03 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 8
Run. Annuities inside an IRA are redundant.

From ClarkHoward.Com

Clark wants to talk again about variable annuities and the damage they can do to seniors' bank accounts. Road shows where variable annuities are sold are popping up all over the country. The target is “nursing home age” people and the hook is a free meal. Once the salespeople have them hooked, they push annuities with a 7 percent guarantee on investment. Sounds impressive right?

Well, what these people aren't told is that annuities have huge commissions that eat up your money. In addition, the penalty to get out of an annuity is 17.5 percent of the money you invested. And the 7 percent is not a guarantee at all. So, in sum, there is never a time when people – older folks especially - should buy a variable annuity.

The groups that are supposed to regulate this industry are doing nothing. So, it's up to you to protect your money and to tell your relatives about it. If your parents tell you they that they have gotten an invitation to a free breakfast, tell them not to go and treat them to a breakfast yourself.

Clark also had this to say:

Clark has been getting tons of calls from listeners who have been ripped off in annuities. First of all, what's an annuity? Under the tax code, annuities are an investment vehicle you buy for retirement savings. And money in an annuity grows tax-sheltered until you take it out after age 59. When you take it out, you pay full tax on the earnings. Tax-deferred annuities may have had a place in someone's portfolio up until the early '90s.

But at that time, changes were made to the tax code. And today, the only reason annuities are sold is so they can be sold again. Because of that, they are the most expensive investments out there and they have huge commissions. A tax-deferred annuity has expenses that are10 times greater than a low-cost mutual fund. So, with all of the massive commissions and yearly fees, you give up two cents on every dollar.

It's like starting backwards every year. Getting out of annuities is also a hassle. You are charged massive “surrender fees” as high as 7 to 10 percent if you want to cancel the account. So, annuities are much easier to get into than to get out of. Granted, there are several different kinds of annuities. Teachers have annuities for retirement and that may be the only thing available through their work.

But tax-deferred annuities are different. So, if you're in an annuity and you want to get out, you can do what's called a “transfer” to either TIAA-CREF - tiaacref.org or vanguard.com. They charge much less than regular companies. And, you only want to transfer if you've gotten out of the “surrender charge” time, which usually last 5 to 7 years. Another annuity is called an “immediate payout annuity,” and these are very technical and esoteric.

The bottom line is that you need to save the maximum you can in your retirement plan at work. That is the first priority. Your second priority is to get out of debt. Opening a Roth IRA is also a good idea. And then start investing for your child's education. But if a salesman starts pitching “tax-advantaged accounts” or annuities, know that it is not in your best interest.

Fuskie
Who wonders if this broker has cold-called you, or is someone with whom you have a trusted relationship...
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (15) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Post of the Day:
Value Hounds

Nu Skin Showing its Age?
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement