Lady is Thinking About Putting $20K into a CD

[Crabcake Johnny]

Interesting when I was doing some research on annuities: Life annuity - Wikipedia, the free encyclopedia



"United Kingdom

In the UK the conversion of pension income into an annuity is compulsory by the age of 75, and has led to a large market for annuities of various types."

 

[scagnt83]

Here is a summary from an educational outlet called "tools & techniques" i believe that "tax facts" publishes this..

I have copy and pasted a few excerpts from the first chapter of the financial planning series. It does a good job of explaining the ambiguity of the term "financial planner"..


"In the purest sense, financial planning is, quite simply,
cash flow planning. It is planning to have available
the amount of cash needed at the time it is needed (or
in the hands of the desired person) to accomplish an
individual’s financial goals"

Financial planning can also be defined as
1. creating order out of chaos

2. a deliberate and continuing process by which
a sufficient amount of capital is accumulated
and conserved and adequate levels of income
are attained to accomplish the financial and
personal objectives of the client

3. the development and implementation of coordinated
plans for the achievement of a client’s
overall financial objectives

4. income tax planning, retirement planning, estate
planning, investment and asset allocation planning,
and risk management planning

Select one of the above, or select all. There seems to be
no one universally accepted definition of what financial
planning is. That’s understandable since the planner’s
role must be as different as the needs of clients and their
ability or willingness to pay for advice. No two people
or problems will ever be exactly the same.

For many clients, the creation of a simple and workable
system that will help them control their cash and
pay their bills on time will be highly successful financial
planning.
For others, successful financial planning will
involve the full time efforts of a planner, staff, and sophisticated
computer and administrative support. Most
planners will be working with clients whose needs fall
somewhere between these two extremes."

 

[HarryRenard]

Smart Money magazine just did a whole spread on annuities and their advantages in this months issue.

Saying that annuities are making a big BIG comeback because they have weathered the storm, and with the various income options available they are a big hit with MOST investors.

If you sell annuities make sure to check the article out it was a good one. If you dont please just carry on with your rant.

 

[GreenSky]

I'm confused. We're talking about $20K not $15 million, right?

Rick

 

[scagnt83]

I'm confused. We're talking about $20K not $15 million, right?

Rick

Yep. Pretty simple case to deal with. Just a little old lady with $20K in CD money... nothing that you need fee based planning for at all!!

 

[scagnt83]

I found this marketing piece the other day. I wish it was up to date for the numbers for 2010, but it is still does a very powerful job highlighting the power of indexed annuities. Its from lfg.
Basically it shows an IEA over the past ten years compared to an S&P 500 index mutual fund.

One aspect that I feel advisors fail to hit hard enough with clients is the fact that your gains are locked in.

A VA that takes a 20% drop in one year will need 15% returns (after fees) for over 3 years to catch back up with an IEA thats averaging 7% over those 3 years...
At 12% it would take over 4 years to catch back up.
How often do you get 12%+ returns for 4 years in a row... after fees???

 

[HarryRenard]

One aspect that I feel advisors fail to hit hard enough with clients is the fact that your gains are locked in.

I tell people EIA's work like a rachet every time your credited interest your gains are locked in and can never go backwards.

 

[Lyn]

I tell people EIA's work like a rachet every time your credited interest your gains are locked in and can never go backwards.

OK. This has been really interesting to me because although I'm not 78 (mid-fifties), I happen to have $21K in a traditional IRA that I want to do something else with and have been looking at options. I do not need the money for any reason, do not want to leave it to kids, but want to move it out of the traditional IRA while tax rates are low. I would like to see the money grow and I am very risk tolerant. Don't need any additional life insurance or FE. What do you guys recommend? I am 6 and 63 licensed, but very inexperienced in that area.

 

[BNTRS]

I'm not experienced with annuities at all. I know she could get a better rate with an annuity than with a CD these days. What would you guys recommend for this 78 year old lady?

Lets cut through all the crap spewed out by the above posts. Here's the deal, if this money is something she doesn't foresee herself needing, and you can reasonably think she won't need it (or the majority of it) after looking at the facts, then an annuity might be beneficial for the sake of higher return on money and being tax deferred.

I would think the shorter the surrender period the better and based on current and anticipated future interest rates, a one year GRO is probably a good bet. An annuity product that has a surrender free provision if she ends up becoming terminally or chronically ill is likely in order.

The higher the free withdrawal amount (amount she can take without paying surrender charges while in surrender) the better. If it's a fixed product, you'll likely be between 10 and 15%. Equity indexed products--I'd be very cautious about these--could be higher say 20%.

 

[Norwayguy]

OK. This has been really interesting to me because although I'm not 78 (mid-fifties), I happen to have $21K in a traditional IRA that I want to do something else with and have been looking at options. I do not need the money for any reason, do not want to leave it to kids, but want to move it out of the traditional IRA while tax rates are low. I would like to see the money grow and I am very risk tolerant. Don't need any additional life insurance or FE. What do you guys recommend? I am 6 and 63 licensed, but very inexperienced in that area.

Why not convert it to a Roth IRA this will let the product grow tax deffered and as long as you hold it for 5 years and wait until 59 1/2 to take it out the money will be tax free....As for the funding of the Roth that would depend on your risk tolerance and time frame for wanting to access the money...

Since your series 6 registered I'm assume you know the drill.
- What is your goal for the money
- other assets / emergency fund
- time frame before you access the account
- how do you wish to access the money ie all at once/
percentage a year / never touch it etc
- how do you feel about risk etc