People in Their 30s Variable Annuities

[insurancemet]

I am wondering if there is a general rule of thumb as far as recommended ages for annuities. My mentor is thinking of putting afamily member's 401k/IRA into variable annuities...Is there any negative to this? Mass Mutual also has a guaranteed rider where the client do not lose their principal and also another one if I understand correctly that it is guaranteed to double in 20yrs??

 

[Norwayguy]

I am wondering if there is a general rule of thumb as far as recommended ages for annuities. My mentor is thinking of putting afamily member's 401k/IRA into variable annuities...Is there any negative to this? Mass Mutual also has a guaranteed rider where the client do not lose their principal and also another one if I understand correctly that it is guaranteed to double in 20yrs??

No rules other than normal suitability for risk tolerance and liquidity. Remember every rider adds cost and the VA is already carrying M&E costs over and above the subaccount costs.

 

[moonlightandmargaritas]

My mentor is thinking of putting a family member's 401k/IRA into variable annuities...Is there any negative to this?

Why would you put something that's tax-deferred inside of something that's already tax-deferred?

When the only tool you have is a hammer, everything looks like a nail.

 

[Norwayguy]

Why would you put something that's tax-deferred inside of something that's already tax-deferred?

When the only tool you have is a hammer, everything looks like a nail.

I'm sorry I disagree. Please point out the cost on the VA for the tax deferral.

 

[moonlightandmargaritas]

I'm sorry I disagree. Please point out the cost on the VA for the tax deferral.

Are you saying that there are no additional costs for the VA as opposed to a mutual fund not inside a VA? In this scenario, they are both tax-deferred.

 

[Norwayguy]

Are you saying that there are no additional costs for the VA as opposed to a mutual fund not inside a VA? In this scenario, they are both tax-deferred.

No I am definatly NOT saying that. I am saying you are not paying a cost for the tax deferral which is granted by the tax code. The reason to purchase a VA in this case would be for the added features you can get with a VA that does not exist with just a mutual fund. However you always have to keep in mind those features come at a cost.

Think of what I am saying like this let's use a fixed annuity inside and IRA compared to funding the IRA with and IRA CD. You are not paying for the tax deferral of the annuity.

 

[moonlightandmargaritas]

The reason to purchase a VA in this case would be for the added features you can get with a VA that does not exist with just a mutual fund. However you always have to keep in mind those features come at a cost.

My apologies Peter, I did a poor job of communicating my thoughts.

What I meant was, aside from the added features (which could be valuable depending on the situation), the mutual fund shares would be less expensive to own than the VA. Both would be tax-deferred. Yes?

 

[Norwayguy]

My apologies Peter, I did a poor job of communicating my thoughts.

What I meant was, aside from the added features (which could be valuable depending on the situation), the mutual fund shares would be less expensive to own than the VA. Both would be tax-deferred. Yes?

Totally correct and if you go back to my first post I was telling the OP not to forget the riders he mentioned have costs that go on top of the M&E costs which are on top of the subaccount costs.

 

[Full Throttle]

The only way it would make sense is if the rider will bump them up on the risk tolerance scale to justify the added expense. Most 30 year olds I run into are not overly concerned, however, some are. Unless the VA is shown as an option next to other less expensive alternatives for your family member to decide, in my opinion, you are screwing them. Given your post, your gut must be saying the same thing.
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Edit: I read your post incorrectly, you did not mention as specific age. Whether it is suitable or not depends on many factors, more than I care to write on my phone.