Author Topic: "Minimally funded" annuity, then transferring money in later (close to retiremen  (Read 777 times)

tylerlekang

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What am I missing with the following strategy?

- convert a small amount of my traditional IRA to an annuity, now (early in the process)
- that way, I'm only paying the higher cost of the annuity on the smaller amount of money, while gaining the benefit of locking in the current mortality rate (which is sure to rise in the future)

- then when I'm ready to retire, transfer the rest of my traditional IRA assets into the annuity and switch it on, essentially giving me a lifetime of income based on the full amount but without having to pay on that full amount


Two general thoughts:

- If this strategy was so genius, then why doesn't everyone do it? (obviously here I'm only referring to the sub-set of investors who WANT their retirement assets in an annuity and thus don't mind giving up control of the principle -- I understand not everyone wants that)

- This strategy minimizes the revenue collected by the company servicing the annuity. So it would stand to reason that they'd protect themselves from this by perhaps limiting the amount that can be transferred in or by taking a big fee for transfers in that are over X amount (or something like that)?


I would appreciate any advice or suggestions by people who know how these things work, if this strategy is sound or if it is likely to fail and why.

tylerlekang

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I'd also appreciate if anyone knows a perhaps more "technically focused" forum to try this question on, if no one here feels they can speak to the questions.

Thanks in advance!