Author Topic: Mom's Retirement - From variable annuity to indexed annuity?  (Read 2439 times)

jzb11

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Mom's Retirement - From variable annuity to indexed annuity?
« on: December 02, 2014, 09:49:14 AM »
Hey Gents,

Got a call from the advisor who put my mom into a variable annuity about 8 years ago. He's suggesting to move her into an indexed annuity in order to protect her income from any losses that may come (whether that is in a year or two).

He is suggesting a lincoln optichoice indexed annuity:

https://www.lfg.com/LincolnPageServer?LFGPage=/lfg/acc/fprod/ann/indann/index.html&LFGContentID=/lfg/acf/prd/irp/ocfia/indacc

The annuity has no fees and gaurantees the principal. The way the annuity works is that it counts the monthly gains or losses through the year, and if the losses are negative, the account does not take those losses. If there are gains, the account is capped at 1.7% (or a similar number) per month.

My thoughts:

Obviously the variable annuity probably wasn't the best choice back in 07-08, but I don't think she knew better.

She is mustachian/super frugal. House and car are paid, I don't know her exact monthly expenses but I'm confident she will not touch this money.

At the same time it is her money and if she needs it I want it to be there for her.

I am a little wary of another annuity, however it seems there is no cost, it removes the risk of loss, and she has some opportunity to gain (although it is reduced). If she wants to safeguard her money entirely she could take it out of the market, but I don't know that that's necessary.

Anyway, what are your thoughts?


livingthedream

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Re: Mom's Retirement - From variable annuity to indexed annuity?
« Reply #1 on: December 02, 2014, 03:26:44 PM »
What's the "advisor's" commission for selling the annuity? There are always costs and fees associated with these things. They just tend to hide them from you.

mxt0133

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Re: Mom's Retirement - From variable annuity to indexed annuity?
« Reply #2 on: December 02, 2014, 03:43:15 PM »
This is called "annuity twisting."  I don't know if it is really valid in your mom's case but beware that "advisors" don't make money once they sell a product, so to earn more they recommend converting an existing product into another and as livingthedream states, there are always fees.

Make the advisor list down why she need to convert and why it would not be fall under annuity twisting or churn.

https://www.wallstreetinstructors.com/ce/continuing_education/ethics2/id40.htm

My two cents, if you mom is mustachian/super frugal then she had no business being in an annuity.  It is and insurance policy just in case she runs out of money, which according to you will not be the case.  See if it makes sense to cash it out and just invest it to minimize on expenses.

Mighty-Dollar

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Re: Mom's Retirement - From variable annuity to indexed annuity?
« Reply #3 on: February 09, 2015, 04:30:47 AM »
Hey Gents,

Got a call from the advisor who put my mom into a variable annuity about 8 years ago. He's suggesting to move her into an indexed annuity in order to protect her income from any losses that may come (whether that is in a year or two).

He is suggesting a lincoln optichoice indexed annuity:

https://www.lfg.com/LincolnPageServer?LFGPage=/lfg/acc/fprod/ann/indann/index.html&LFGContentID=/lfg/acf/prd/irp/ocfia/indacc

The annuity has no fees and gaurantees the principal. The way the annuity works is that it counts the monthly gains or losses through the year, and if the losses are negative, the account does not take those losses. If there are gains, the account is capped at 1.7% (or a similar number) per month.

My thoughts:

Obviously the variable annuity probably wasn't the best choice back in 07-08, but I don't think she knew better.

She is mustachian/super frugal. House and car are paid, I don't know her exact monthly expenses but I'm confident she will not touch this money.

At the same time it is her money and if she needs it I want it to be there for her.

I am a little wary of another annuity, however it seems there is no cost, it removes the risk of loss, and she has some opportunity to gain (although it is reduced). If she wants to safeguard her money entirely she could take it out of the market, but I don't know that that's necessary.

Anyway, what are your thoughts?
OMG! I don't even know where to begin. She needs to STOP dealing with this "adviser" who is actually a SALESMAN!
As if variable annuities are bad enough, index annuities are one of the WORST financial products ever created.
http://www.yourinvestmentadvise.com/index-annuity.html
This adviser is lying. She will pay INDIRECTLY through things like lower performance caps, payment calculations, etc.
Her actual return on investment will wind up being between 2 and 5%. Really pathetic.
I would consider getting out of that variable annuity. At the VERY LEAST I would switch to Vanguard. She will be saving about 2.5% per year. Multiply that times 10 years and you can see how devastating those high costs of owning a "retail" annuity are.

Clyde

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Re: Mom's Retirement - From variable annuity to indexed annuity?
« Reply #4 on: February 24, 2015, 08:39:41 PM »
Moving into another annuity would surely cost your mother and there’s no guarantee that she will gain what she’ll lose. It is better for her to just get out of the variable annuity she is in if she decided not to continue with it. But of course, there will also be fees when she withdraws her money from her annuity.