Inherited a couple of little ones from my dad (they were split 4 ways) and that little bit of fun cash comes in handy once a year. Is it something any of you investment wizards recommend or hold in disdain?

I had a 403b investment fund where a small portion of the contributions went to an annuity.

Didn't think twice about it until I decided to roll it over to an IRA. I could not lump-sum roll over the contributions that were tied up in the annuities.

They will only disperse them on a quarterly basis over something like 15 years.

I had no idea about this, and would have done the rollover much sooner if I'd know there was this limitation.

So, lesson learned is, don't make contributions to an annuity if you think you might want the ability to move them/roll them over.

Thank you. Not an issue.

"Little bit of fun cash that comes in handy once a year", sign me up.

Hate them

I bought into one in August from Pacific Life. I pay no fees and it has a zero floor, so I can't lose my investment. If the S&P index stays the same or goes up even a point it pays 7.5 percent on the anniversary of my investment. There was a lot of uncertainty, especially in an election year, so I went conservative with my 401K rollover. What do you guys think? This was suggested by someone I trust and who knows a lot about investing. What do you guys think?

You basically are paying for not having more upside on market participation. Is there a surrender fee to get your money out?

I guess ultimately, I'd probably rather buy structured notes instead of an annuity. You can have a similar structure but more liquid and more choices.

There is a surrender fee. Can I rollover my annuity to one without penalty?

nactownag said:

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You basically are paying for not having more upside on market participation. Is there a surrender fee to get your money out?

I guess ultimately, I'd probably rather buy structured notes instead of an annuity. You can have a similar structure but more liquid and more choices.

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I like the concept of low-cost structured notes with downside protection, but I want something as close to what institutional investors get as possible. I have recently investigated Calamos offerings, including CPSL, and while they are retail-focused and relatively easily traded, I'd prefer something underwritten by a bigger bank or investment firm.

Without going to a private placement HNW custom offering, do you know of some decent retail-ish alternatives?

Hmmmm not sure of where to buy notes on the public markets. Not sure if it's possible.

We source ours from Goldman Sachs, JP Morgan, etc.

Just check the fees, they're in the prospectus. And ask the guy selling them how he gets paid. And how much. Annuities are extremely lucrative to the people selling them.

Not likely at this point. It's okay. You'll just need to keep it until penalty goes away. Probably 7 years.

Ultimately, because of that and because there are in my opinion better ways to invest low risk money that's why I'm not a fan.

But I think of all the annuities in the world that you could have bought the pac life option isn't a bad one.

I know nothing about them, but my Mom had one that took over 6 months of trying to get them to "pay" when she passed away. There were designated beneficiaries that they kept denying existed but my Mom saved copies of EVERYTHING. They eventually found it on their end & agreed that it was set up correctly but it was a lot of trouble + it didn't make much money over the years. It's possible she just got a crappy one from her bank, but it soured me from ever considering one.

B-1 83 said:

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Inherited a couple of little ones from my dad (they were split 4 ways) and that little bit of fun cash comes in handy once a year. Is it something any of you investment wizards recommend or hold in disdain?

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More info needed. I assume these are deferred annuities and the insurance company is sending you some sort of periodic payout. Are they fixed (like a bond) or variable (like a mutual fund)? What company are they with? There are a lot of nuances to "annuities".

Generally, fixed annuities act like tax deferred bonds and you need to be mindful of the rate, credit quality, and potential withdrawal penalties.

Variable annuities can be very expensive and although tax deferred, can be less tax efficient than similar "taxable" investments that are taxed at lower capital gains and qualified dividend rates.

Thanks for the info. My term is 5 years. I will definitely do more research leading up to that. One of my biggest regrets is that I never worried about retirement much until it was close to time. I guess that's probably typical for those of us who didn't go to school for business or finance. Oil and gas is where my expertise is.

Agsrock44 said:

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I bought into one in August from Pacific Life. I pay no fees and it has a zero floor, so I can't lose my investment. If the S&P index stays the same or goes up even a point it pays 7.5 percent on the anniversary of my investment. There was a lot of uncertainty, especially in an election year, so I went conservative with my 401K rollover. What do you guys think? This was suggested by someone I trust and who knows a lot about investing. What do you guys think?

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Trust me. You're paying fees on way or another.

Agsrock44 said:

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I bought into one in August from Pacific Life. I pay no fees and it has a zero floor, so I can't lose my investment. If the S&P index stays the same or goes up even a point it pays 7.5 percent on the anniversary of my investment. There was a lot of uncertainty, especially in an election year, so I went conservative with my 401K rollover. What do you guys think? This was suggested by someone I trust and who knows a lot about investing. What do you guys think?

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This is an indexed annuity, which is a form of a fixed deferred annuity. While you don't think you are paying a fee, you are almost certainly liquidity restricted subject to a contingent deferred sales charge (CDSC). Lack of liquidity is something you should be rewarded for.

You have a floor of zero with a 7.5% return if the S&P price goes up by 1 point. You don't typically get any credit for dividends, which typically comprise 30-40% of the annual return from stocks. The S&P 500 has had a positive return about 73% of the years over the past century, so if you experience something similar, your return would average out around 5.475%,

The risk free rate (the ten year US Treasury) is currently paying @ 4.5%. You are essentially expecting to be paid a premium of just < 1% for taking additional credit risk, liquidity risk, and market risk. It isn't a free lunch.

I Am A Critic said:

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Agsrock44 said:

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I bought into one in August from Pacific Life. I pay no fees and it has a zero floor, so I can't lose my investment. If the S&P index stays the same or goes up even a point it pays 7.5 percent on the anniversary of my investment. There was a lot of uncertainty, especially in an election year, so I went conservative with my 401K rollover. What do you guys think? This was suggested by someone I trust and who knows a lot about investing. What do you guys think?

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Trust me. You're paying fees on way or another.

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Ha ha on no fees:

Pacific Life indexed annuities have various fees, including advisory fees, rider fees, and charges for optional benefits.

• Advisory fees
  These fees are withdrawn from the contract value annually and can't create a taxable event. The Pacific Advisory Fixed Indexed Annuity allows for advisory fees up to 1.5% of the contract value. The Pacific Index Foundation charges a fee of up to 1.5% of the Protected Payment Base.
  
  
• Rider fees
  These fees are deducted from the account value and can vary from 0.25% to 1%. Rider fees can help mitigate risks like inflation or investment losses.
  
  
• Interest Enhanced Death Benefit
  This optional benefit charges 0.40% of the Death Benefit Base annually. It guarantees that the beneficiary's benefit will grow each year.
  
  

Other fees associated with Pacific Life indexed annuities include: Charges for withdrawals, Total Gross Fund Expense Range, and Total Net Fund Expense Range.

You don't pay the agent fee but they are built into the product:

What are the fees for index annuities?


Agent Commissions
Type of Annuity
Typical Commissions Paid to Agents
Fixed-Indexed
6% 8% or more
Variable
4% 7% or more
Single-Premium Immediate
1% 5%
Fixed
1% 3%

I have an annuity and I need cash now.

I'll trade you for my timeshare

Agsrock44 said:

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Thanks for the info. My term is 5 years. I will definitely do more research leading up to that. One of my biggest regrets is that I never worried about retirement much until it was close to time. I guess that's probably typical for those of us who didn't go to school for business or finance. Oil and gas is where my expertise is.

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Engineering major here - I had a Chem E Prof that often would emphasize the importance of saving for retirement and taking advantage of company 401k matching programs. He had worked in the real world for at least 20 years before his teaching career. I think at least partly because of him I started saving for retirement day 1 of my first job out of college and never stopped.

OP…

My only experience with an annuity was when we liquidated my parent's estate and distributed the funds among my brothers and sister. As I recall, each of us paid about 10% of our inheritance in taxes due to the annuity in the estate.