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Question By
Montana1980

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Should we buy an annuity
Due to an inheritance we have 234 thousand invested and 150 thousand outside the trust invested in a mutual which we can drawn on. The investment was 250 thousand dollars 20 months ago. We have found a new financial advisor and he says to put three months of expenses in a savings account and one month of expenses in checking (take from the fund outside the trust.) The rest put into 12 and 24 month CD's. The remaining money in the trust he feels should go in a 5 or 10 year annuity. My wife's brother doesn't think we should switch advisors or the investments and leave investments as they are. Any advice other than a marriage counselor?

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Annuity and Suitability

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First, yes set you should have emergency funds set aside that will last you 6 months.

Then the first thing that should always be discussed with any financial advisor when investing is the suitability of the investment vehicle. Each investor has different needs and wants that will affect that suitability.  These factors will be based on your age, net worth, risk tolerance, health and time frame for the maturity of the investment.  With that said annuities are not usually suitable for most investors due to their high fees and commissions associated with them. There is usually always a better way to invest than annuities. That said for some people it is an appropriate investment vehicle, but that will depend on your situation.  I would ask your investment advisor the following question “Are you a fiduciary?”  If his answer is no, I would look for another advisor who was a fiduciary or at the very least ask him to detail any commissions and fees he will make from this transaction and what impact will it have on your total at various time intervals. Also, ask about any surrender charges or penalties you may occur if you withdraw before the end of the agreement.

Now some general recommendations are if you are under 50, a healthy person, not disabled, and don’t plan on retiring within the next 7 years an annuity is not right for you.  Certificates of deposit, (CDs) most likely will be too conservative for you as well since they will not keep up with inflation over the long term. Right now with the yield curve on CDs are favoring short term investors of less than 1 year. But most likely you will need to look into mutual funds or exchange-traded funds (ETFs) that have some exposure to stocks. As a general rule of thumb the old-timers you used to say take your age and subtract it from 100 and that number is how much you should have invested in stocks. The rest would have been invested in fixed income vehicles like bonds and CDs.  (Age 55 so 100 – 55 = 45% stocks, stock-based ETFs or mutual funds).  Things have changed in this current low inflation, low-interest-rate environment so suitability on that mix will be dependent on your needs. Personally, for most people, a Standard and Poor’s 500 index-based fund from a no-load mutual fund company with low annual administration fees is what is needed. I won’t recommend any companies here but just do a search on Google and you will have a lot of funds to choose from.

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annuity

Helpful to 4 out of 4 people

Do not buy an annuity, an annuity is insurance, do not mix insurance with investments. Read the book "New Money Dynamics" it is a very old investment book but the best advice I have read yet.

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Aloha Montana1980, call Dave Ramsey

Helpful to 8 out of 10 people

Aloha Montana1980, call Dave Ramsey for vindication on this one. If you're looking for a tie-breaker between you, your spouse, and your old and new financial planners, go and call Dave Ramsey's free hotline and ask on the air. He'll give you a good solid and sound financial answer which I suspect will have nothing to do with annuities and CD's. Think index mutual funds and money market mutual funds. If not, you can also give his book a read, I borrowed my copy from my local library before upgrading to a used copy that I bought for next to nothing off of Amazon books. Take care and God bless.

v/r,

SpartanHiker

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Reply by
Jensetter04

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Helpful to 1 out of 4 people

Hello Everyone, for the past 18 months, I have been battling with my credit score because it was very low, until I met this programmer and senior tech analyst (sgiacalone03 @ gmail . com) through a friend of mine. He helped increase my credit score from 435 to 780. I was really surprised that he helped me do it within 7 days, even though I doubted him at first because he told me to pay an upfront service charge, before any action can take place. After I paid a little upfront fee. he got my credit report fixed within 5-6  days, my credit score increased. He also cleans up chexsystem report and the DUI report. You have 110% guarantee of a clean and safe job from him therefore, I advise you contact him (sgiacalone03 @ gmail . com.) for a similar service. He is completely good and trust worthy. You will be glad you send him a message

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You might want to do some research...

Helpful to 20 out of 21 people

Congratulations on the windfall!

I agree with having the expenses set aside for emergency. Why take it from your inheritance or trust? Don't you have an emergency on your own already? The reason I ask is that why not invest the full amount rather than taking a little from it and pay taxes, since it counts as your income. But if you don't have any emergency fund set aside at all, then it is good to set about 3-6 months worth of expenses. If you have a decent income with lots of liabilities (kids, college, debt, mortgage, etc..) then you might want to put aside more. Also, if your household income is unstable then you would need MORE months since it is unpredictable. In general, the less stable your income is, the more you need to set aside.

I would not invest in CD's at all due to the very low mature rate and short mature time as indicated. If you want to invest the money, why would you keep it in a short term plan? You didn't mention your age or retirement goal, so I cannot be more specific. Might as well let it grow and think about long term. Therefore, CD's wouldn't make sense. 

Regarding annuities, I hope you understand the concept of it. But I don't recommend annuities since you are giving the insurance company a big chunk of your money ahead, then draw a certain set amount (in most cases) for the rest of your life during retirement. Worse is that it is less if you have it in set time frame like you mentioned. Think about it. You give them a large amount at first then only to gamble with time to collect minimal set amounts back monthly. Would you live long enough to get all your money back? Annuities are usually recommended due to the advantages for the ADVISORS, not the fund owners, because of high commission for them! They are in favor of the agent more than the fund holder. 

If I had that money, I would simply put the full amount into mutual funds and not cash out any. Taxes would reduce what you can get in your hand, so it's not that great of an incentive. Then I'll contribute a set amount into it monthly as well to help it grow, if you don't have some type of investment account already. Once it's invested, it's not gonna be touched until the retirement age. But if you have some heavy debt load, then I would recommend using your own money and as little as possible from your inheritance to wipe out your debt as soon as possible. Debt corrodes your ability to build wealth. 

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Helpful to 5 out of 5 people

I had given a lengthy reply, but apparently this website didn't approve it. 

In a nutshell, I believe the advisor to be incorrect.  Do some research and read up on investments, keep looking.  The current advisor seems to be more on top of things.. 

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Reply by
mindjazz

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Helpful to 6 out of 7 people

The accounts the new advisor wants you to invest in,  pay extremely little other than some annuities.  Diversification is the key. 

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help

Helpful to 3 out of 6 people

What is better Roth or annuties

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jhj

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nh

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Reply by
Jensetter04

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Helpful to 0 out of 2 people

Hello Everyone, for the past 18 months, I have been battling with my credit score because it was very low, until I met this programmer and senior tech analyst (sgiacalone03 @ gmail . com) through a friend of mine. He helped increase my credit score from 435 to 780. I was really surprised that he helped me do it within 7 days, even though I doubted him at first because he told me to pay an upfront service charge, before any action can take place. After I paid a little upfront fee. he got my credit report fixed within 5-6  days, my credit score increased. He also cleans up chexsystem report and the DUI report. You have 110% guarantee of a clean and safe job from him therefore, I advise you contact him (sgiacalone03 @ gmail . com.) for a similar service. He is completely good and trust worthy. 

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FIX IT HERE

Helpful to 0 out of 2 people

Hello Everyone, for the past 18 months, I have been battling with my credit score because it was very low, until I met this programmer and senior tech analyst (sgiacalone03 @ gmail . com) through a friend of mine. He helped increase my credit score from 435 to 780. I was really surprised that he helped me do it within 7 days, even though I doubted him at first because he told me to pay an upfront service charge, before any action can take place. After I paid a little upfront fee. he got my credit report fixed within 5-6  days, my credit score increased. He also cleans up chexsystem report and the DUI report. You have 110% guarantee of a clean and safe job from him therefore, I advise you contact him (sgiacalone03 @ gmail . com.) for a similar service. He is completely good and trust worthy. 

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0 People Helped

Helpful to 0 out of 7 people

Hello Everyone, for the past 8 months, I have been battling with my credit score because it was very low, until I met this programmer and senior tech analyst (yatesnovakovic @ g m a i l . c o m) through a friend of mine. He helped increase my credit score from 435 to 780 to 820 I was really surprised that he helped me do it within 9days, even though I doubted him at first because he told me to pay an upfront service charge, before any action can take place. After I paid a little upfront fee. he got my credit report fixed within 5-6 days  days, my credit score increased. He also cleans up chexsystem report and the DUI report. You have 110% guarantee of a clean and safe job from him therefore, I advise you contact him (yatesnovakovic @ g m a i l . c o m) for a similar service. He is completely good and trust worthy. 

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0 People Helped

Fix it here

Helpful to 0 out of 7 people

Hello Everyone, for the past 8 months, I have been battling with my credit score because it was very low, until I met this programmer and senior tech analyst (yatesnovakovic @ g m a i l . c o m) through a friend of mine. He helped increase my credit score from 435 to 780 to 820 I was really surprised that he helped me do it within 9days, even though I doubted him at first because he told me to pay an upfront service charge, before any action can take place. After I paid a little upfront fee. he got my credit report fixed within 5-6 days  days, my credit score increased. He also cleans up chexsystem report and the DUI report. You have 110% guarantee of a clean and safe job from him therefore, I advise you contact him (yatesnovakovic @ g m a i l . c o m) for a similar service. He is completely good and trust worthy. 

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