Then you come out with something along the line of:
You must be about 18 years old due to the nature of your response Why do you need an Annuity its already tax Deferred. Wake up fool . ITs not for the deferral its for the INSURANCE , Why do you insure your HOUSE/ CAR / LIFE bt NOT your largest ASSET… Please rread something other then PLAYBOY!!!!!!!!!!
towards someone who has been on this board for 3 years 16 weeks. Are you aware that members on this board have a periodic meet-up(s) in person?.. This board is not quite as anonymous as you think. Please leave the ‘yahoo’ style of posting on yahoo.
@magsbag
As to annuities:
The tax deferral really applies to growth in assets over time. They are best used outside of an already tax deferred account like a 401K which already shields the growth. This is particularly true with a Variable Annuity which is tied to the performance of separate ‘accounts’ within the annuity (Looks almost like a 401K/IRA with funds you can select). The problems with Variable Annuities are:
1) Fees are much higher than normal.. on top of the loads of the mutual funds themselves. I have seen expense ratios near 4% for some Variable Annuities – not including the loads of the mutual funds.
2) Surrender charges can be brutal.. 25% or more of principal put in. Figure out how much longer you expect to live (Average age your direct relatives have lived minus your current age is a decent estimate).
3) The financial advisor may claim a return of 7% guaranteed, but I would read the fine print. Typical guaranteed rates are 1 to 2%.. and guaranteed rates of return are generally applicable to Fixed Annuities only because the value of a Variable Annuity is tied to the underlying investment/funds.
4) There is a large ‘kickback’ to the seller of an Annuity (sales charge – on top of the sales charge that the Variable Annuity’s funds may have).
The pluses – depending upon the type and term:
1) Principal tends to be guaranteed against loss – though double check this for Variable Annuities, some of them may not be guaranteed against loss.
2) Guaranteed level of payments.. again check Variable Annuities.. they may not have a guaranteed level of payments.
One of the biggest problems is the way Annuities are marketed. Make sure the Variable Annuity matches your needs. You already have a pension, which is a guaranteed income stream — and read the fine print of the Annuity (can’t stress that enough). One important thing to remember with investing is that risk and reward are opposite sides of the same coin. The only way to get a higher return is with greater risk of loss. Anything that seems to violate this should be viewed with suspicion.
One thing to look at is your ‘risk profile’. How much can you risk and how much do you want to risk. Another low risk option would be rolling the TSP into an IRA at a brokerage and then using the brokerage to purchase A rated corporate bonds (I would limit the purchase to bond of 1 year and under in the current condition). You will be able to get better than ‘CD’ rates this way.
