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At 59 and half I will be able to take out money from my variable annuity.Quesion:since i have had it for 17 years and it just recently bounced back to where it was 17years ago plus 10,000-I am thinking of moving 20% into the annuity moneymarket fund from the index 500 fund just so it stays at least at principle and move 20% to a growth fund and pray that in 14 months when i can start withdrawing this step will serve me well- When i called today to find out when I could start withdrawing the rep suggested a FIXED anniuty for some of the monies that I plan to withdraw at that time - my thoughts - would do better in a couple of dividend stocks or even CD's -if I had just put it in the bank -rule of 72 I would have doubled it for that length of time!!
Any thoughts on this strategy? Many thanks!!!
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I see you cross posted this. My question on the first post is.....why are you so fixed on annuities? You might wish to read a bit and perhaps invest in mutual funds, individual stocks, etc.

Donna
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I am thinking of moving 20% into the annuity moneymarket fund from the index 500 fund just so it stays at least at principle and move 20% to a growth fund

So the question is? - over the next 14 months which is better:
100% S&P 500 Index

or

60% S&P 500 Index
20% Moneymarket
20% Growth Fund

My crystal ball is broken so I can't see the future which would be the only way to know for sure.

This may be more a question of - in 14 months when you start withdrawing the money how well set up is your retirement. And, what is going to let you sleep better at night??



With the 100% Index, you will probably have more/higher ups and downs but also probably have a better chance of a higher value when you do start withdrawing. - not by much based on history but a little..

If you have expectations that growth funds will do better (which small cap growth funds have historically) or if you would sleep better not worrying about the ups and downs the switch may help - but which is better in the end - only you and time can tell

d(Small Cap Growth)/dT
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Before everyone gets tied up over you mentioning annuity, is your retirement income coming out of TIAA-Cref ?
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...When i called today to find out when I could start withdrawing the rep suggested a FIXED anniuty for some of the monies that I plan to withdraw at that time....

Sometimes with things like a variable annuity that you already have, it is best to keep the money in it until you need it even if it is not the ideal investment. You need to proceed very carefully, before you do anything you need to know exactly what the tax consequences will be and what fees will be charged. thes ecould cost more then it is worth to get the money into a better investment.

It is likely that your "rep" is really a sales person that will get paid a large commission if you buy another annuity. This is much like a used car salesperson trying to talk you into trading in a car to buy a new one. They could be right, but they are trying to make money, not look out for you interests.

If by a "fixed annuity" you are referring to an immediate annuity that is like buying a pension plan, then buying one at 59.5 will get you a lot less than if you waited to buy one when you are older. If it does not have an inflation protection feature then it is likely that the buying power of the annuity will be a lot less decades from now even with moderate inflation. If it does have some inflation protection then look at the details carefully, it might not really cover 100% of any possible future inflation.

If you can delay starting to take social security that will get you a larger benefit and is essentially like buying an annuity. Some people may have doubts about the futurre of social security, but it would be hard to argue that it is less dependable than any of the large insurance companies that sell annunities.


Greg
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When I hear the word "annuity," I run the other way. When I hear that an advisor thinks an annuity is a good thing, I run even harder. Why are so many people so stupid? Look and see where these advisors live and play...you're paying for it.
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When I hear the word "annuity," I run the other way. When I hear that an advisor thinks an annuity is a good thing, I run even harder. Why are so many people so stupid? Look and see where these advisors live and play...you're paying for it.

Well, while I largely agree, especially for a 59 year old in this artificially IMO low interest environment, I LAO think there are some instances where considering annuities make sense.

For instance, I have about 5% of my portfolio in the TIAA-CREF annuity account, not yet annuitized. It has paid 3% (recently) to 8% with low cost and I will annuitize it eventually. I think age 70's with a higher interest environment will make sense. Vanguard also has a low-rate place to shop.

But in this high cost environment for this poster, absolutely right.

Hockeypop
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Potentially the WORST savings instrument is a deferred variable annuity (DVA). These things sport all manner of fees that will, quite literally, ear your total return lunch. Consider the following typical annual costs:

1. Mortality expense: usually 1 to 2%
2. Sub account fees: .75 to 1.25%
3. Mutual fund 12b-1 fees: .25 to .75%
4. Mutual fund management and admin fees: .5 to .8 (low cost index or MM funds) up to 1.5 - 2% for active management fees, particularly on proprietary funds, usually offered by retail brokerages or insurance DVAs
5. Contract maintenance fees: usually an annual fixed dollar charge, ranging from $20 to $50/yr (may be waived over a certain $$ amount)
6. Premium tax. This varies by state and is more common in cash value life insurance, but in certain states, typically runs .5 - 3%
7. Surrender charges: usually 8 to 10% is charged if annuity holder surrenders the VA, and it gradually decreases to 0 over 5 to 10 years.

Now, do the math. How much are you paying from the VA earnings for the privilege of holding your savings dollars in a DVA?

For example, if the DVA has a gross return of 8% in a given year and all expenses add up to 4%, then 50% of your earnings are being paid out in expenses. Those same dollars held in a discount brokerage, like Fidelity, invested in a mix of passive index funds/ETFs and some actively managed funds should cost, in total, less than .5%, or in this example, about 6.25% of earnings. And keep in mind, in bad years you will pay the same...so if your DVA has an investment return of -5%, and your total annual expenses are 4%, you'd have a net 9% loss.

Your pitiful 17 year return is most likely due to expenses and crappy proprietary mutual funds.

The only time it makes sense to hold savings in a DVA is if you are in the maximum Fed and State income tax bracket and you need additional tax deferred savings beyond your employer retirement plan and your IRA....and only then would I consider a DVA as offered by someone like Vanguard or Fidelity whose expenses are considerably less.

So if you're past your surrender date, I'd withdraw the account balance, pay the tax on the small gain you have, and redirect into a taxable brokerage account with Vanguard, Fidelity, TRowe Price, TD Ameritrade or the likes....but get it away from the insurance company...then asset allocate.

BruceM
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Thank you Greg - then the question becomes after these considerations when I start withdrawing some of it my thoughts are to place whatever I take out and place in the other parts of the port so that the port will-have 30%in stocks 30%--in treasury money market fund,30% in laddered Cd's,5% in bond funds, and 5% in silver and gold. I am concerned because income from 60% of the port is not generating income and this time BUT it is a safe as I can make it.
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annuity no --
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thanks
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Thank you -I am invested in all these vehicles and have been pleased with the results -those decisions were mine - BUT I am not thrilled with the performance of the variable annuity and have been waiting patiently, so that I may exit and with that step will move that money to stocks , etc.
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I had made that investment 17 years ago and wish that I had not - it is invested in mutual funds: when I did not ask as many questions as I do now - I figured at the rule of 72 -this investment vehicle should have performed much better and I am moving funds out of it in 14 months when I can fro the purpose of attaining better performance.
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These are EXACTLY the reasons that I am getting out on the day that I can!!!I realized this sevral years ago and have been berating myself since and since I had maxed out the IRA the reasoning was that it was a tax -deferred "safe" place - at that time i thought "they" could do better, but have since learned that even I can do better than selections offered in the annuity and with expenses- yes, there was a momentary silence yesterday when I called them to find out the exact day that I could start withdrawing:)
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...Thank you Greg - then the question becomes after these considerations when I start withdrawing some of it my thoughts are to place whatever I take out and place in the other parts of the port so that the port will-have 30%in stocks 30%--in treasury money market fund,30% in laddered Cd's,5% in bond funds, and 5% in silver and gold. I am concerned because income from 60% of the port is not generating income and this time BUT it is a safe as I can make it.

...


It is hard to know exactely what is best without knowing all the details of your situation but a good place to start would be the targeted retirment funds like these;

https://personal.vanguard.com/us/funds/vanguard/TargetRetire...

You don't need to exactly match the dates on the funds with your retirement date, for example if you are already retired but want more in stocks, then you could use something like the 2020 or 2025 fund to be more aggressive.

If there isn't one that is exactly right for you, then you can put part of your money in the closest fund then use the rest to invest in other funds to match your desired allocation. For example if you found one that looked good to you but didn't have the 5% silver and gold that you wanted, then you could put 95% in a targeted retirement fund and 5% in separate gold and silver investments.

Greg
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When you buy target funds, aren't they just "fund of funds" and you're paying expense fees once in the individual fund and again in the fund of funds. If it's what you want, I'd buy the individual funds in the same percdentage held by the target fund.
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When you buy target funds, aren't they just "fund of funds" and you're paying expense fees once in the individual fund and again in the fund of funds

I haven't really investigated the matter, but I don't think this is the way they work. (Or maybe the target funds work in this way at some brokerages.)

--SirTas
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