Should I roll into an annuity?

[HoosierLife]

So my wife has an old 401K with about $100k in it. I need to move it as it's sitting there with Fidelity with limited options and high fees. I was just going to move into something comparable with lower fees, but then I keep coming back to rolling it into an annuity.

I can roll it into a growth annuity for 7 year stents and get around $8500+ in commission each time. So in 28 years, around retirement, I would have had $35,000 in commissions, plus whatever growth the annuity had.

Would I do better to just stick it in the market or put it into annuities?

 

[Allen Trent]

So my wife has an old 401K with about $100k in it. I need to move it as it's sitting there with Fidelity with limited options and high fees. I was just going to move into something comparable with lower fees, but then I keep coming back to rolling it into an annuity.

I can roll it into a growth annuity for 7 year stents and get around $8500+ in commission each time. So in 28 years, around retirement, I would have had $35,000 in commissions, plus whatever growth the annuity had.

Would I do better to just stick it in the market or put it into annuities?

1. Double check the Fidelity 401k, the fees may not be what you believe them to be. even if they are say 1%, you could have Fidelity move it into a Traditional IRA with Fidelity & likely little to no expenses. Not say you should keep it there, just saying fees may not be what you think they are.

2. Couple of downsides to not keeping within 401k are that 401k have greater creditor protection than individual IRA accounts. maybe not a big reason to keep it in 401k, but worth noting. Also, if your wife gets a new job, the current 401k could be rolled to her new employer in many cases. Again, not saying she should, but 401k plans while employed permit loans whereas Traditional IRAs do not. lastly, there are some IRS items that can sometimes be better with early distributions from a 401k plan than Traditional IRA. For instance, she may be able to pull money out at age 55 from a 401k plan without owing the 10% IRS early distribution penalty, whereas it is age 59 1/2 for Traditional IRA

3. what kind of annuity? Any annuity paying 8.5% right now is likely to have some really heavy fees or annual expenses. MYGA fixed annuities pay way lower than that in commissions, many times 2-3% for fixed MYGA annuities. interest rates are really low & going lower lately because of the very low treasury rates, etc. An EIA might be an option, but those also have much lower participation rates & cap rates currently due to the low interest rate world. you may be looking at a protected floor of 0% with maybe 50% participation rate. maybe an average of 4-6%.

Maybe do half & half. Keep half in Fidelity for your aggressive choices & roll half into some annuity you like for bond type money.

 

[Stephen]

So my wife has an old 401K with about $100k in it. I need to move it as it's sitting there with Fidelity with limited options and high fees. I was just going to move into something comparable with lower fees, but then I keep coming back to rolling it into an annuity.

I can roll it into a growth annuity for 7 year stents and get around $8500+ in commission each time. So in 28 years, around retirement, I would have had $35,000 in commissions, plus whatever growth the annuity had.

Would I do better to just stick it in the market or put it into annuities?

I can help you take a look at her Fidelity account and run some numbers with you if you'd like. Lemme Know.

SB

 

[HoosierLife]

1. Double check the Fidelity 401k, the fees may not be what you believe them to be. even if they are say 1%, you could have Fidelity move it into a Traditional IRA with Fidelity & likely little to no expenses. Not say you should keep it there, just saying fees may not be what you think they are.

2. Couple of downsides to not keeping within 401k are that 401k have greater creditor protection than individual IRA accounts. maybe not a big reason to keep it in 401k, but worth noting. Also, if your wife gets a new job, the current 401k could be rolled to her new employer in many cases. Again, not saying she should, but 401k plans while employed permit loans whereas Traditional IRAs do not. lastly, there are some IRS items that can sometimes be better with early distributions from a 401k plan than Traditional IRA. For instance, she may be able to pull money out at age 55 from a 401k plan without owing the 10% IRS early distribution penalty, whereas it is age 59 1/2 for Traditional IRA

3. what kind of annuity? Any annuity paying 8.5% right now is likely to have some really heavy fees or annual expenses. MYGA fixed annuities pay way lower than that in commissions, many times 2-3% for fixed MYGA annuities. interest rates are really low & going lower lately because of the very low treasury rates, etc. An EIA might be an option, but those also have much lower participation rates & cap rates currently due to the low interest rate world. you may be looking at a protected floor of 0% with maybe 50% participation rate. maybe an average of 4-6%.

Maybe do half & half. Keep half in Fidelity for your aggressive choices & roll half into some annuity you like for bond type money.

Well she won't be going back to work. She's SAHM now. I don't plan on pulling this out before retirement. I guess I could check with Fidelity to see. I'm just now learning about all this stuff :/

I have NMO contracts for annuties, so that's why they're that high. But was looking at FandG's Accumulator, Equitable's new Teton 7 and National Westerns.

 

[HoosierLife]

I can help you take a look at her Fidelity account and run some numbers with you if you'd like. Lemme Know.

SB

Thank you sir! As soon as I can get her to figure out how to login again :/

 

[LostDollar]

So my wife has an old 401K with about $100k in it. I need to move it as it's sitting there with Fidelity with limited options and high fees. I was just going to move into something comparable with lower fees, but then I keep coming back to rolling it into an annuity.

I can roll it into a growth annuity for 7 year stents and get around $8500+ in commission each time. So in 28 years, around retirement, I would have had $35,000 in commissions, plus whatever growth the annuity had.

Would I do better to just stick it in the market or put it into annuities?

I am, perhaps, more conservative than some. I would check out Fidelity Target date retirement funds for options. In order to compete with others like TDAmeritrade, Schwab, and TIAA, they probably have some with reasonably low fees and they will give you a changing proportion of stocks and bonds as you age. You could then look at creating an investment account with Fidelity or Schwab or other, and periodically put some business windfall profits into that and do some allocation between index stock funds and bond funds as you see fit.

In the event you experience some undesirable death or health event, that would leave your wife with a solid, conservative, easy to manage basic basis to go with whatever other financial plans you choose to make for your family.

 

[Allen Trent]

Well she won't be going back to work. She's SAHM now. I don't plan on pulling this out before retirement. I guess I could check with Fidelity to see. I'm just now learning about all this stuff :/

I have NMO contracts for annuties, so that's why they're that high. But was looking at FandG's Accumulator, Equitable's new Teton 7 and National Westerns.

Teton seems like a pretty decent product. Thought the par rate was 100% now & annual cap around 6% or so.

Keep in mind, those commissions you are earning are taxable income & self employment, so you might be netting 5500-6000 of that 8500 after taxes, $800 a year based on 7 year EIA. that means you net about .8% as net comp. So, when you are comparing where to put the money, only really count that amount as the "return" you are getting for being paid on your wifes account. Every time you start a new 7 year EIA (if they are available in 7 years), you lock in new surrender schedule, etc.

Again, for your bond portion of your portfolio, that Teton would be pretty decent to know you have 0% protected & up to 5-6% in best years.

 

[HoosierLife]

I am, perhaps, more conservative than some. I would check out Fidelity Target date retirement funds for options. In order to compete with others like TDAmeritrade, Schwab, and TIAA, they probably have some with reasonably low fees and they will give you a changing proportion of stocks and bonds as you age. You could then look at creating an investment account with Fidelity or Schwab or other, and periodically put some business windfall profits into that and do some allocation between index stock funds and bond funds as you see fit.

In the event you experience some undesirable death or health event, that would leave your wife with a solid, conservative, easy to manage basic basis to go with whatever other financial plans you choose to make for your family.

She's got over 1.5MM windfall if I croak early. This is just money I don't know what to do with :/

 

[Stephen]

Thank you sir! As soon as I can get her to figure out how to login again :/

Sounds good , when you can get logged in shoot me a message on FB and we set up a call/screen share. Full disclosure , I am probably going to barter for some Facebook marketing advice out of you

 

[HoosierLife]

Teton seems like a pretty decent product. Thought the par rate was 100% now & annual cap around 6% or so.

Keep in mind, those commissions you are earning are taxable income & self employment, so you might be netting 5500-6000 of that 8500 after taxes, $800 a year based on 7 year EIA. that means you net about .8% as net comp. So, when you are comparing where to put the money, only really count that amount as the "return" you are getting for being paid on your wifes account. Every time you start a new 7 year EIA (if they are available in 7 years), you lock in new surrender schedule, etc.

Again, for your bond portion of your portfolio, that Teton would be pretty decent to know you have 0% protected & up to 5-6% in best years.

Yeah that makes sense. So that's the comparison I'm trying to run.

Less risk plus the commission OR more risk/more reward/no commission.

Being a Final Expense junkie, safety and guarantees make me feel all warm and fuzzy.