Should I roll into an annuity?

[jasperjohns]

A planner is not so much to help you beat the market as much as they are to help coach your behavior. Kind of like a trainer at a gym. They should also provide value in other areas like tax planning (ex. would contributing to a HSA and taking a health ins. plan with a higher deductible be prudent), insurance planning and retirement income planning (ex. how much do I need to save for retirement and how do I do that), college planning (ex. 529, prepaid plan or wing it). If all you are looking for is someone to beat the market your guess may be as good as any "planners".

Very difficult to find holistic true "fee only" planners as the pay is terrible.....Good luck

 

[Allen Trent]

Very difficult to find holistic true "fee only" planners as the pay is terrible.....Good luck

There are many good ones, but mainly those that want 1% of AUM. Just havent seen one worth that amount yet with accounts of $1M, 2M or more. $1k or $2k per month in fees can be quite the drag on the portfolio, so they better have some massive holistic skills to deserve that

Definitely worth it for $100k accounts if they are giving all the advice you mention on tax planning & insurance planning. But most I have seen have not even gotten client to max their auto/home/umbrella liability or make sure they have 20x income in life insurance protection while in the accumulation/ income earning years.

Hourly rate would be ideal, but consumers are just not their yet to the extent that a planner can feed themselves to get going & have high enough revenues long term. Most generally start as commissioned brokers at the big firms, then go out to fee based on AUM. Then, they get selective to have only wealthy clients.

Hopefully that will happen someday to be more prevalent, but robo advisors & online places are making that hard on the good ones

 

[jasperjohns]

To clarify, when I said "fee only" I meant paid on a hourly basis or only for financial plans not the AUM model. The largest and wealthiest individuals in the financial service industry work under this model.

And I agree with Allen Trent in that the hourly model would be ideal but the industry has a long way to go to train consumers that this is what would be best for them.

 

[pfg1]

To clarify, when I said "fee only" I meant paid on a hourly basis or only for financial plans not the AUM model. The largest and wealthiest individuals in the financial service industry work under this model.

And I agree with Allen Trent in that the hourly model would be ideal but the industry has a long way to go to train consumers that this is what would be best for them.

Problem is, "most" advisors couldn't make enough money that way to earn a decent living.
Being licensed to charge fees is one thing, getting enough folks to want to pay for that advice is likely a tough uphill climb.

Its funny, in financial services people bitch and moan and complain about fees, yet they gladly pay it to other professionals all day long. And on AUM, many people are paying that much in hidden costs/fees (or more) with no advice, and they don't even know it.

 

[Tahoe Ray]

Garrett Planning Network does fee-only/hourly and has advisors all over the country, including ones that you can work with remotely.

 

[LostDollar]

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

Awhile back I asked a conceptually similar question about another financial product. @junkman was kind enough to respond with the following link and comment. I bolded the consideration that is important for you.

Efficient Frontier

Begin with Four Pillars. There are discussions that make taxable vs nontaxable moot. Better to expend your effort understanding portfolio construction and controlling expenses.

To the extent that I have been able to comprehend and remember points around those basic issues, my confidence in dealing with my specific situation has improved tremendously.

I have also found random reading on the following site to be educational. (it does not have the overwhelming volume of posts that bogleheads has.)

It introduced me to the concept of FIRE. And again, the concept of asset allocation underlies other commentary.

Investor Alley

 

[KRobby]

Thanks everyone, so the consensus is, based on my risk assessment, to.... I still don't know.

Oh yeah, the original question was if putting a $100k into an annuity/including my commission would that beat sticking it into the market.... assuming I would put it into a Vangaurd Indexed fund?

I'm fine with sticking it in the indexed fund for the next 25+ years as far as risk tolerance goes. But if it would work out to around the same number with less risk in a growth annuity (with my commissions tacked on), that would be fine too.

There's a reason there's caps/spreads etc with the fia that limits growth... it's further down the risk/reward continuum than an equity index mutual fund. It's a safe money alternative, that has greater potential than other safe money instruments which are extremely limited in our low interest environment. But you're right, we also have to figure back in your 6-7k upfront commission. More than likely your best answer is to do both.

 

[Allen Trent]

There's a reason there's caps/spreads etc with the fia that limits growth... it's further down the risk/reward continuum than an equity index mutual fund.

are you saying the reason caps & spreads exists is because it is further down risk/reward continuum?

while that may be visibly true, I don't believe it is the reason caps/spreads exists, but I could be incorrect. From my understanding, an EIA or an IUL only guarantee of interest crediting might be the floor (sometimes a small 1 -2% worst case credit at death/surrender). I am not aware if there is any guarantee of a any participation or cap in the contract. If interest rates continue to drop or go negative, carriers wont have any money to buy options no matter what the par or cap rate is on an option for sale. So, even if the S&P 500 index is growing at any rate, it is possible an EIA could credit 0 or 1 or 2% if carriers have no money from their general accounts fixed investments to buy the options.

Not saying it likely, but some are suggesting we are potentially going to see near 0 or negative interest rates like are being seen on other parts of the world. I am just suggesting the reasons for caps & par rates is because carriers know they have no control over 2 components necessary for an index credit. 1- the rate they earn on their own general fixed investments 2- the efficiency & pricing of the options market offered in 1, 10 or 100 years that a contract may be active

 

[Tahoe Ray]

I am not aware if there is any guarantee of a any participation or cap in the contract.

They exist on all contracts but in most are nominal. Some carriers have bailout provisions that let you exit the product if the cap drops below a certain #. There are also a couple (I believe Pac or Jackson) that guarantee the current rate (par) for a period of time beyond the first segment.

 

[Allen Trent]

They exist on all contracts but in most are nominal. Some carriers have bailout provisions that let you exit the product if the cap drops below a certain #. There are also a couple (I believe Pac or Jackson) that guarantee the current rate (par) for a period of time beyond the first segment.

Agree & thanks for the clarification. I am just surprised how many consumers & even producers think the cap & par rates are known in the future. that is the part I meant that the contract doesn't guarantee specific par & cap rates for decades or life of contract. It will let you maybe avoid a surrender charge, but not guarantee specific bare returns of anything more than 0%. do any EIA guarantee the 1 or 2% like IUL guarantee as a worst case calculation at time of death or surrender? I would guess no as IUL can offer that because they know they are making money on load charges, COI & policy fees. EIA doesn't have have that luxury. Thus the lower cap & par rates see on EIA