Do any of you have any opinions on a variable annuity as an investment for my 77 yr. old mom? She's in some Dean Witter funds now that aren't performing at all and this was suggested to me by a broker. Any other ideas for her? She has no interest in managing her money so it needs to be a no-brainer. Maybe index funds? Or short term bond funds? Or Ginny Maes?Thanks for any advice you can offer.
Do any of you have any opinions on a variable annuity as an investment for my 77 yr. old mom?Our ex-broker put us in a variable annuity years ago and now that I've read up on them I've learned that it was a bad choice for us but a good one for the broker & insurance company. You pay both. We would have had to pay too high a tax penalty to pull out at this point, so we did the next best thing. We rolled it over from high fees and no index funds to a Vanguard Annuity that offers the Index 500 (long term investment) or other types. If you do feel an annuity would be right for your mom, we found Vanguard's to be our best bet. Here is what I've learned about GNMAs - please correct me, other Fools, if I have anything wrong. If your choice of investments is fixed - the GNMA pays better than money market or CDs - historically averages about 6 1/2%. She can reinvest dividends, or have them all paid to her for income, or take partial payments and leave some dividends reinvested. It's safe (government backed mortgages) and a no-brainer. You can buy them directly from Vanguard with no broker fees. She should understand the price fluctuates with interest rates, but as long as she wouldn't need to sell the principal for at least 5 years - she should be able to sleep without worrying.No, I'm not paid by Vanguard, just a big fan because they offer some of the lowest fee funds in the market and have great customer telephone service.Charlotte
Thanks Ms. Apple Pie (great name) - Do you think we should spread the $ around or just put it all in GNMA's. Its about 150K. Thanks again
People are welcome to jump on me, but I wonder whether a 77 year old woman should be in any type of annuity at all. As I understand it, the annuity income stops when the client dies, and the principal reverts to the insurance company. A 77 year old woman can probably expect to make it to 90, but not much beyond.You can get 4.8% in a money market fund these days. I just calculated that if $150K is put in such a fund and drawn down in equal increments for 25 years, the monthly payout is $859.50. If you choose 15 years, it's $1170.62. If you choose 15 years and it's 6.5%, it's $1306.66.Of course, you have to figure out how to make the money run out just slightly after the heartbeats do.
jeannie: regarding your 77 year old mom putting $ into a variable annuity... my question is: what's her goal for the lump sum? That's the most important question, because if she wants a stream of income (which won't necessarily stop at her passing away) it may be a viable option. Also, if she has no particular need for the funds and wants to park it in a tax-deferred vehicle, it might work. There are many legitimate uses that could be discussed, but I don't know enough facts. Variable annuities can offer many investment subaccounts, so she could select several that could produce a composite yield that is higher than straight GNMA's. Call around for ideas from a few insurance agents who specialize in VA's and have a heart-to-heart discussion with each, notifying each agent that you're on a fact-finding mission & will not decide on a proposal until you've heard from each & have compared them fully. Good luck. PP
JABoa - the income stream from an "immediate annuity" doesn't necessarily stop at the death of the annuitant - only if the owner chose a "lifetime only" payment option (which I would strongly discourage). Another choice would be "lifetime or period certain" which would guarantee continued payments to beneficiary(ies) for the remaining period of the "time certain" if the annuitant died sooner. Anyway, many deferred annuities offer options to withdraw monies at regular or irregular intervals, so one doesn't have to be locked in! Look around, you'll find lots of variations & select the plan that best serves your needs. PP
I'am looking into Viatical Settlements, You may want to check them out also. Here's a link to one in my area that should give you an Idea of how they may work for you... http://www.first-trust.com
I'm looking into Viatical Settlements Why are you looking into them? Seems like the site you referenced used the word "guaranteed" an awful lot. When someone tells me that I am guaranteed a 14% return with low risk, it feels like that is not The Whole Truth. I gather that this is buying the life insurance policy of somebody with a terminal illness at a discount in the hopes that they will die soon. Whereas the discount percent may indeed be "guaranteed", the time until payoff is certainly not. And what about the guy who keeps going back and asking, "Are you dead yet?" I bet he gets a hefty percentage.
I'm looking into Viatical Settlements Not only are they gruesome, but I have heard that some people who have gotten into them as an investment have been very unhappy. It seems that with the new medical advances coming along all the time, those who were supposed to die soon aren't cooperating. AIDS patients have been especially stubborn by refusing to die fast.Carol
Charlotte - Thanks for the info. You're right about fees & returns; they both can vary widely! Some 403b plans offer one or more index funds, and they can do a good job of accumulating retirement money. Teachers can take advantage of the 403b programs to supplement (social security and) state retirement plans in a big way. An now adding Roth/IRA's makes for a pretty good variety for most people. Vanguard's program is pretty good! PP
A couple of considerations. If you sell your funds now you will incurr capital gains taxes. And if you invest the proceeds in a variable annuity index fund any further appreciation will be taxed at the marginal rates of the beneficiaries upon her demise.If you are comfortable with an index fund why not sell the Witter funds and buy Spydrs. This would allow her to withdraw funds as needed (by selling shares of SPDRS), while any capital gains in the account will receive a stepped up basis upon her death, reulting in no tax liability for the heirs.My research found Vanguard 500 Index fund to be a good choice if you decide to go that way. I personally rolled some fixed income annuities into it and have been satisfied with the results. For the reasons stated above present and future investments will be in SPDRS.Just my thoughts on the subject. Hope they help.Guyb
If you are comfortable with an index fund why not sell the Witter funds and buy Spydrs. This would allow her to withdraw funds as needed (by selling shares of SPDRS), while any capital gains in the account will receive a stepped up basis upon her death, reulting in no tax liability for the heirs.GuybI'm also trying to decide about investing in SPDRS vs Vanguard 500 Index. I agree with the above reasons, especially the capital gains. One drawback I can see to SPDRS is that dividends would not be reinvested and they would be in an index fund. This could be either good or bad depending on one's circumstances, for instance if money is needed on a regular basis.I have heard that SPDRS are better for shorter term holding while index funds are better for long term. Do you think that is a good rationale? How does paying a commission to buy and sell SPDRS vs the expense of the index fund play out?Carol
Viatical investments besides being ghoulish are tricky. i heard on the TV that many are for aids patients that are suddenly living longer because of new drugs. I would not want to be the one rooting for them to die so I could get my money!!
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