Author Topic: Ameriprise & Annuities  (Read 2720 times)

Ottoford

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Ameriprise & Annuities
« on: August 05, 2016, 06:56:42 AM »
My Father in law recently passed away and my mother in law is in declining health.  We are at the stage where we are trying to figure out how they have invested their money to ensure my mother in law will be OK moving forward.

All I have heard so far is they have a financial advisor from Ameriprise and there are annuities.  I know little about either since I do not use a financial advisor and I currently don't hold any annuities.  From what I understand there are a lot of different types of annuities.

We are meeting with the financial advisor to gain as much insight as we can before going off to do our own research.

I'm just wondering if anyone has some initial insights to share based on the small amount of information I have.

merula

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Re: Ameriprise & Annuities
« Reply #1 on: August 05, 2016, 07:10:06 AM »
I'm so sorry for your loss.

Please stay far, far, FAR away from Ameriprise. They are not a company that puts their customers first, and their annuities are high-load, high-fee.

https://www.consumeraffairs.com/finance/ameriprise.html

The basics of an annuity is that you give them a chunk of money, and they'll pay you back under set conditions. For example, you might buy an annuity that will pay you $1,000 per month for the rest of your life as a way to ensure that you'll always have money to meet your expenses. The financial services company will demand a price for this annuity based on your life expectancy, the interest rate they can expect to earn from investing that money and money to cover the expenses they have from administering the annuity, plus a healthy chunk of profit on top.

Unless you know something fundamentally different from the insurance company (like, their actuarial tables predict you'll die at 75 while everyone in your family has lived until 110), you will virtually never come out ahead on a transaction like that compared to investing the money yourself.

The biggest problem with annuities is that the advisers selling these things aren't fiduciaries; they are not required to put your interests ahead of theirs. So they will sell you on the annuity that pays the biggest commission rather than the one that best fits your situation (if your situation really does call for an annuity.)

The second biggest problem is that typically, once you sign up, you're locked in and can't change anything.

Can you share more about the situation and why you think an annuity is needed?

Ottoford

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Re: Ameriprise & Annuities
« Reply #2 on: August 05, 2016, 03:38:12 PM »
Here is what we learned today.  About 90% of the investment assets are in variable annuities but with an income rider.  All of the annuities except one have been in long enough to be liquidated.  We know the advisor gets 1.3% and the annuity fee is 1.1%. 

He explained the benefits as guaranteed not to lose principal and at 74 years old my mother in law may not have time to ride out market fluctuations.  The annuity has guaranteed growth at 6% annually.

I asked about other fees such as the mortality fee his explanation was that over time annuities have lower fees than managed mutual funds.  I did not like that answer as I felt it was a non-answer.

The advisor did say he was going to set up other scenarios for us to review if we wanted to move the liquid annuities into a managed account.

I will say all the paperwork is confusing and I wish they had better reporting.  At least he knows we are watching closely now.

I felt like he was confused by some of my amateur questions and he should have had a better handle on where the assets were currently placed.  Like when I asked about a $125k deposit into an annuity in June after some stock in Con Ed and another energy company were sold the same month he seemed a bit confused.

Thanks for the consumer affairs website.

tonysemail

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Re: Ameriprise & Annuities
« Reply #3 on: August 05, 2016, 04:04:55 PM »
thanks for sharing.  I don't know much about annuities, so it's interesting to read your case.

Isn't 6% gains good for someone age 74?
Is that net of fees or do you subtract the fees to get the real return?

Ottoford

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Re: Ameriprise & Annuities
« Reply #4 on: August 05, 2016, 06:46:06 PM »
Fees comes out of the 6%. So it's likely closer to 3.5%.  The fact that the initial deposit is protected is nice.  My mother in law has not drawn any money from the annuities yet. 

Half is in an IRA, most of which is being rolled over from my father in laws account.  The funds not in the IRA we are going to try to transfer into an existing trust. 

While we went to the meeting determined that the annuities should be liquidated, we left the meeting thinking that at 74 years old protecting her assets while making a decent return may be a sound choice for her.  She is in early stage Alzheimer's so assisted living is going to be a real and expensive possibility. 

So while I am not thrilled by the idea of using Ameriprise, I think if we stay involved and try to educate ourselves we can work it out.  The idea of overhauling everything at this stage is not appealing.

pbkmaine

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Re: Ameriprise & Annuities
« Reply #5 on: August 05, 2016, 07:58:58 PM »
These are a very bad deal for your mother. There is absolutely no need or reason to have an annuity in an IRA. You do not need a tax-advantaged vehicle inside of another tax-advantaged vehicle. It makes no sense. Forget the managed account. It's just more unnecessary fees. If you do not want to figure this out yourself, find a FEE-ONLY financial planner in your area to help you decipher this. For more information on fee-only planners:
https://www.napfa.org/

mathjak107

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Re: Ameriprise & Annuities
« Reply #6 on: August 06, 2016, 02:25:32 AM »
there is an exception . you can use qualified annuity's (QLAC'S) in your ira  which are not subject to rmd's at 70-1/2 . you can delay things out longer .

they may help in certain tax situations , especially if the rmd's will get your social security taxed or medicare premiums increased  .

but except for having a need i am not in favor of annuity's in an ira .
« Last Edit: August 06, 2016, 08:10:49 AM by mathjak107 »

Ottoford

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Re: Ameriprise & Annuities
« Reply #7 on: August 06, 2016, 07:12:57 AM »
Thanks for the insight.  I think we need to seriously consider moving out of the annuities.  I would have no issue managing the money but I don't want to be seen as the daughter in law who is trying to take control.  People suffering from Alzheimer's can be very suspicious.  If my husband agrees to take the lead on this I think that would work better. 

There are other people involved, so I also need to manage those relationships and not over-step my boundaries.  A lot of this is cringe-worthy.  The ridiculous schmoozing, the confusing financial statements, the non-answers.  The advisor was not well prepared for our meeting but I think I need to chalk that up to a brother-in-law that wants to think an advisor is a friend and was not clear about the agenda of the meeting.  What should've been a one hour meet, greet and get down to business wound up being a three hour affair with lunch (bought by my brother in law).

My brother in law uses the same advisor, so untangling them may be challenging.  I need to keep family relationships the first priority then assist with the financial stuff where appropriate.  Actually the first priority is making sure my mother in law has enough money to live out her life comfortably since long term assisted living is a real possibility in her future.  So I guess if we have to step on some toes to do that we will.

For right now our first step is getting all the IRA assets out of my father in laws account and into an account for my mother in law and dealing with putting the non-IRA assets into the family trust.  I will continue to read about annuities and try to find out more about their specific annuities.

It will be a good learning experience. 

Thanks again for the assistance.

merula

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Re: Ameriprise & Annuities
« Reply #8 on: August 08, 2016, 10:08:36 AM »
For right now our first step is getting all the IRA assets out of my father in laws account and into an account for my mother in law and dealing with putting the non-IRA assets into the family trust.  I will continue to read about annuities and try to find out more about their specific annuities.

I'm not 100% sure this should be your next step. It depends on the RMDs your MIL needs and both her age and the age your FIL was. If you haven't already gotten some outside advice on this topic, I suggest: http://www.kiplinger.com/article/retirement/T032-C000-S004-when-a-spouse-inherits-an-ira.html