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My parents are retiring, and want to put what little they have of an IRA and retirement plan (about $70K) into an annuity with an insurance salesman from their church. They had no idea what an annuity was, but did know something about a 3.5% fee. They couldn't tell me more except that he was promising (their words, not necesarily his) them $350/month in income (from $50k of the money. They had no idea what the investment vehicle was other than "mutual funds". My mother freaked out when she saw that she had "lost" $800 from her S&P 500 index fund. Her share (about $20K) she wants to "leave to the boys", so she seems somewhat open to long-term buy and hold.

I am having a hard time explaining that annuities are probably not the investment vehicle for them. In about a year and a half they have to start taking minimum distributions. From the $50k they would like some income, but the $20k my mother wants to leave and grow.

Any suggestions on what how to tell them about annuities? I am trying to get them to put it into Vanguard or other low-fee funds.

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