Annuity app declined

[DHK]

Just to add - most states require state-specific Annuity CE to be completed before selling annuities.

Plus, most companies have their own internal annuity suitability training before selling annuities for them.

The suitability guidelines should be outlined in both resources.

 

[LostDollar]

Keep in mind, a couple of issues you need to consider in addition to the liquidity issue that others have mentioned for suitability. when moving someone's employer retirement money (IE; 401k) to an IRA( I assume you meant IRA rollover annuity, not a NQ Annuity to be bought if the person cashed out their retirement account & paid taxes & IRS early distribution penalties):

1. IRAs have an IRS 10% early distribution penalty if money taken out before age 59 1/2 whereas leaving it in a 401k plan or rolling it to his next employers 401k plan would only have IRS 10% penalties before age 55.

2. 401k plans permit loans to be taken if it is with your current employer, but IRAs do not. So, rolling to an IRA can shut the door to the person being able to take a temporary loan & pay it back.

3. Employer 401k plans have greater creditor protection than an IRA for bankruptcy,lawsuits, etc. The average person likely doesn't need to worry about this one as many states also provide $1M of creditor protection to IRAs.

Basically, the reasons for the Annuity IRA like lifetime income need to outweigh these items above in addition to tying the money up in an annuity that would likely come with a 5-15 year surrender charge schedule.

Interesting post, thank you for making it.

I had to argue forcefully with my former employer about taking out a 401K loan even though I was over 55. They simply didn't want employees borrowing against their retirement money for any reason.

Different reason your post really interested me though. In looking for some basic info about annuities, I ran onto the term Roth Conversion Ladder, on a site called MrMoneyMoustache, and elsewhere. The discussions center around that as a tool for getting your retirement money early, without penalty.

The proponents of the idea suggested that 401k and ira plans were similar types of arrangements and that when leaving an employer where you had a 401k, you should immediately convert it to an IRA and then plan out your retirement cash needs and set up a ladder of Roth conversion moves. I thought there might be more possible objections to that than immediately met the eye, so I appreciated seeing your comments.

 

[DHK]

I had to argue forcefully with my former employer about taking out a 401K loan even though I was over 55. They simply didn't want employees borrowing against their retirement money for any reason.

Loans are an option available, but only per the plan documents if the plan makes loans available.

 

[Allen Trent]

Interesting post, thank you for making it.

I had to argue forcefully with my former employer about taking out a 401K loan even though I was over 55. They simply didn't want employees borrowing against their retirement money for any reason.

Different reason your post really interested me though. In looking for some basic info about annuities, I ran onto the term Roth Conversion Ladder, on a site called MrMoneyMoustache, and elsewhere. The discussions center around that as a tool for getting your retirement money early, without penalty.

The proponents of the idea suggested that 401k and ira plans were similar types of arrangements and that when leaving an employer where you had a 401k, you should immediately convert it to an IRA and then plan out your retirement cash needs and set up a ladder of Roth conversion moves. I thought there might be more possible objections to that than immediately met the eye, so I appreciated seeing your comments.

I like the idea of Roth conversion for some people, but I hate the blanket ideas. Paying taxes now to have tax free money later is not good for a lot of people. It all depends on their current tax bracket compared to future tax bracket. Most average seniors are in low tax brackets during retirement, with many even in the 0% bracket becasue Standard deductions wipe away a lot of their taxable income. So, why would someone in the 15% bracket want to convert now & pay a tax of 15% plus state if they might have a chance at getting some of those dollars out in retirement tax free even from a Traditional IRA.

Think of all the people that did Roth conversions when they were 1st offered in the late 1990s. The market was at a high, people converted were taxed at income tax rates of the time & high market values on many of the accounts. Fast forward to many of those individuals now in retirement in much lower brackets under the current Trump tax changes. So, they paid taxes in higher brackets on market values at high levels.

For me, it is a 1 on 1 type decision that requires quite a bit of analysis of not only their income sources, but also their planned spending. Even more support for why clients need tax diversification of their savings with taxable, tax free, life insurance, etc.

Roth conversion is a no brainer when you run into someone that was in an average to high tax bracket that will be temporarily in a low bracket such as clients that go on a mission trip for few years, go back to college for few years or those that retire early & can keep themselves in a low tax bracket for a few years by living off cash, life insurance distributions or roth distributions

 

[LostDollar]

Loans are an option available, but only per the plan documents if the plan makes loans available.

Yes, and this plan at that time did make loans available. I knew what I was doing, was over 55, and short of them firing me (which they did later on anyway), I had the income to repay the loan. It was just frustrating to have to sit with the controller for 10-15 minutes and listen to his loan lecture for 30-40 year olds.