My Annuity Plan..as of now.

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Bronco Billy
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My Annuity Plan..as of now.

Post by Bronco Billy » Sun Jul 15, 2018 4:45 pm

I don't have much experience with annuity's but open to all suggestions on what I could do better. I have three annuity's. My FA is history and these are now house accounts that I control. These were all purchased in July 2014. I am better at saving money than understanding what all i read. Thanks for any information or help with this.

I will be 65 in August. I have 4 weeks 2018 PTO left but If i can hold out till Jan 2019 will get another 5 weeks PTO bonus. My wife is lot younger than me and wants to work at least 5 more years. She is a RN and makes good money. I plan to get on her medical when i retire. My SS will be about 30k year. Should wait to take it but dont have the best of health and want to get some of my money. I worry about taking out to much and having to pay a high tax rate. Maybe too late. A wise man told me once it was a poor woman who can't support one man.

1. Symetra Custom 7 Premium Fixed Annuity funded with non-qualified money (235k cash) its pays 1.75% and its 258k. The contract was for 7 yrs and expires in July 2021. The plan was to annuitize this annuity first when I decided to retire and get payments for 5 years. It says once the contract expires the min rate goes to 1%. If I start getting payments Jan. 2019, I would only get 1% for about 2.6 years.

How can 4 months make this much difference? I have requested Symetra Annuity payout option twice. Both for 5 years one starting in August 2018
Monthly payment $4462. Tax exclusion ratio 87.9% internal rate of return 1.48% Total of 60 payments $268k

Jan. 2019.
Monthly payment $4655. Tax exclusion ratio 84.3% internal rate of return 2.73% Total of 60 payment $279k

Almost $200 a month difference for 60 months waiting just 4 months? One of these has to be screwed up ...Dont they?
Thinking i need to lock the one starting in Jan 2019 in. I only have a few days to decide on this.


2. Sentinel Personal choice 5 yr. Single premium Deferred annuity funded with non-qualified money (176k) it pay 3.12% and its 199k. This is a 5 year and will be out of contract in Second to draw from. I like this one its been growing pretty good.

My choices as of now are to:
1. Redo another 5 years in July 2019 with Sentinel for like 3.65% now.
2. Do a 1035 exchange to Vanguard into a variable annuity.
3. Not sure if i could maybe do a 1035 to a Single Premium Immediate Annuity. Vanguard told me they only have VA now.
4. Not sure cashing it out would help would have to pay taxes on all income in 2019.


3. Jackson National Elite Choice 8 yr index annuity. It was funded with 401 (132k) money and is worth $113. I don't like this one! Its an index annuity and don't really know how it works. Typing this up it looks like its been better than the Sentinel Annuity. So maybe its beter than i think. I have taken the free 10% withdrawals (about 25k) out of it the last two years. its down to 113k. I will be taking my 3rd free withdrawal the last of this month Sending it to my Vanguard IRA. Plan to keep taking them for the next several years until i can move it all to my IRA with out a surrender fee.

I dont know what i am going to do in 5 years when i have to start taking RMD. :(

I do appreciate all the help from the experts on here.

Nate79
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Re: My Annuity Plan..as of now.

Post by Nate79 » Sun Jul 15, 2018 5:34 pm

I do not know what you should do with these horrible products but just wanted to offer my condolences that your salesman took you to the cleaners. It's really sad when salesmen dupe their clients and in this case so much money at stake.

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David Jay
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Re: My Annuity Plan..as of now.

Post by David Jay » Sun Jul 15, 2018 5:47 pm

Bronco Billy wrote:
Sun Jul 15, 2018 4:45 pm
3. Jackson National Elite Choice 8 yr index annuity. It was funded with 401 (132k) money and is worth $113. I don't like this one! Its an index annuity and don't really know how it works. Typing this up it looks like its been better than the Sentinel Annuity. So maybe its beter than i think. I have taken the free 10% withdrawals (about 25k) out of it the last two years. its down to 113k. I will be taking my 3rd free withdrawal the last of this month Sending it to my Vanguard IRA. Plan to keep taking them for the next several years until i can move it all to my IRA with out a surrender fee.

I dont know what i am going to do in 5 years when i have to start taking RMD. :(
Sorry to be the bearer of bad news, but putting 401K money into an index annuity is a really bad recommendation. But the annuity salesman got his commission, so he did OK.

The annuity will cause significant issues with RMDs, I would strongly recommend taking the penalty and getting the final amount out in the year that you turn 69.5 (I.e. the year before RMDs begin).
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

FBN2014
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Re: My Annuity Plan..as of now.

Post by FBN2014 » Sun Jul 15, 2018 8:17 pm

It's obvious that you are confused about what you have with these annuities. You haven't stated what you are trying to accomplish as far as how much income you need in retirement, what your other if any assets are, whether you want to leave a legacy to heirs, etc. As stated before, the salesman made out well, you not so much. You need to speak to an experienced financial advisor who only gives advice that is in your best interest based on your needs and goals. This type of advisor does not manage money or sell products for a commission. Here's an article that can help you find such an advisor.
https://www.nerdwallet.com/blog/finance ... -planners/
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

Bronco Billy
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Re: My Annuity Plan..as of now.

Post by Bronco Billy » Sun Jul 15, 2018 9:35 pm

FBN2014 wrote:
Sun Jul 15, 2018 8:17 pm
It's obvious that you are confused about what you have with these annuities. You haven't stated what you are trying to accomplish as far as how much income you need in retirement, what your other if any assets are, whether you want to leave a legacy to heirs, etc. As stated before, the salesman made out well, you not so much. You need to speak to an experienced financial advisor who only gives advice that is in your best interest based on your needs and goals. This type of advisor does not manage money or sell products for a commission. Here's an article that can help you find such an advisor.
https://www.nerdwallet.com/blog/finance ... -planners/
I am trying to get out of this Annuity mess and pay the minimum in taxes I can gt by with. I could probably live on my SS but I would like to have better access to my Non Qualified money.

FBN2014
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Re: My Annuity Plan..as of now.

Post by FBN2014 » Sun Jul 15, 2018 10:24 pm

Here's my thoughts on this dilemma. You'll probably take a big hit on the surrender charges. Look at your contract and it will tell you what the surrender charge penalty is for early withdrawal. Your 4 years into it, so the 5 year annuity will mature next year, the others have a few more years to run and then you can take the money out without penalty. DO NOT annuitize any of the annuities. That means you are giving up total control and liquidity for a monthly payment. If you can live on your SS payments for a few years then you will get your money back. Once you cash them in, any gains will be taxed as ordinary income. That can't be avoided. Annuitizing in order to take advantage of the exclusion ratio in order to pay less in taxes makes no sense. If you want income but don't want to pay taxes then you should buy a muni bond fund once you cash out of the annuities as they mature. Vanguard has an intermediate term muni bond fund that I own. Or you can just buy a MYGA which is what your 5 year annuity is. Gains are deferred until you cash out and then the entire gain is taxable. It's the same as buying a CD at the bank. If you want to keep the tax deferral then just buy a MYGAs at various maturities, I.e. 2, 3, 5 years, similar to a CD or short term bond. But don't annuitize. Then you lose the ability to get the money back if you need a large lump sum.
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

Bronco Billy
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Re: My Annuity Plan..as of now.

Post by Bronco Billy » Mon Jul 16, 2018 11:00 am

Thanks FBN2014 for you're input. I will wait to hear from others but I do like the monthly payments to keep my yearly tax cost down. You are right it does tie up my money for several years.

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David Jay
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Re: My Annuity Plan..as of now.

Post by David Jay » Mon Jul 16, 2018 11:09 am

Bronco Billy wrote:
Mon Jul 16, 2018 11:00 am
I do like the monthly payments to keep my yearly tax cost down.
Please explain how you think this works.
1. In Taxable
2. In the Rollover ( I presume the 401K money is currently classified as a traditional IRA rollover).
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Stinky
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Re: My Annuity Plan..as of now.

Post by Stinky » Mon Jul 16, 2018 11:18 am

I agree with a lot of what FBN2014 wrote above. Commenting on a few of his points -

Look at the contracts to see when surrender charges go away. Sounds like it's 2019 for Sentinel, 2021 for Symetra, and 2022 for Jackson. Most annuities have a 10% per year penalty-free partial withdrawal, and you could make a 10% withdrawal for each contract - your choice. Since the Jackson annuity is in a 401(k) plan, you'll pay taxes if you take the 10% withdrawal if you make a distribution from the 401(k), but no taxes if you leave it in the 401(k).

I'm not as strong as FBN2014 on not annuitizing the contracts, especially the Sentinel and Symetra ones. I wouldn't worry about the exclusion ratio, or let that enter into my decision. I'd look at two things - what is the internal rate of return of, say, a five-year certain payout, versus a five-year CD ladder - and, more importantly, do you have a concern about tying up money with an insurance company for five years. If you had a sudden need for cash during the five years, you can get it from the CDs with a small early withdrawal penalty, but probably not the annuity. Personally, I wouldn't buy a new multi-year guarantee annuity (MYGA), because you'll just be paying a new commission and getting a new surrender charge schedule.

On the Jackson annuity, I'd take my 10% penalty free withdrawals, and then take the whole amount out in 2022. Probably leave it in the 401(k) until I need it.

You're going to pay some taxes - no way to avoid those. You've got some gains on the Sentinel and Symetra contracts. You might defer them for a few years if you take the annuitization option, but you can't avoid them.

Hope this helps.
It's a GREAT day to be alive - Travis Tritt

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Stinky
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Re: My Annuity Plan..as of now.

Post by Stinky » Mon Jul 16, 2018 11:34 am

FBN2014 wrote:
Sun Jul 15, 2018 8:17 pm
It's obvious that you are confused about what you have with these annuities. You haven't stated what you are trying to accomplish as far as how much income you need in retirement, what your other if any assets are, whether you want to leave a legacy to heirs, etc. As stated before, the salesman made out well, you not so much. You need to speak to an experienced financial advisor who only gives advice that is in your best interest based on your needs and goals. This type of advisor does not manage money or sell products for a commission. Here's an article that can help you find such an advisor.
https://www.nerdwallet.com/blog/finance ... -planners/
Didn't mention in my prior message - I think that this is an excellent thought. He/she can sort through a lot of this stuff, and ask you questions interactively.

Whatever you do, don't talk to another annuity salesman!!
It's a GREAT day to be alive - Travis Tritt

Bronco Billy
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Re: My Annuity Plan..as of now.

Post by Bronco Billy » Mon Jul 16, 2018 1:30 pm

David Jay wrote:
Mon Jul 16, 2018 11:09 am
Bronco Billy wrote:
Mon Jul 16, 2018 11:00 am
I do like the monthly payments to keep my yearly tax cost down.
Please explain how you think this works.
1. In Taxable
2. In the Rollover ( I presume the 401K money is currently classified as a traditional IRA rollover).
The Symetra and Sentinel are Non Qualified (funded with Cash). If i take the 10% free withdrawals the rule is last in first out. Tax will come out first. Dont really want to pay taxes on 25K. If I annuitize the Symetra i get 5 years of $55k and the taxes will only be $8400.

How i have been explained is Jackson funded with 401 I can take the Free 10% withdrawals each year and roll it over into my Vanguard 401 without paying any taxes. This has been working good the last two years.

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David Jay
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Re: My Annuity Plan..as of now.

Post by David Jay » Mon Jul 16, 2018 3:51 pm

Bronco Billy wrote:
The Symetra and Sentinel are Non Qualified (funded with Cash). If i take the 10% free withdrawals the rule is last in first out. Tax will come out first. Dont really want to pay taxes on 25K. If I annuitize the Symetra i get 5 years of $55k and the taxes will only be $8400.

OK, I kind of get that.

How i have been explained is Jackson funded with 401 I can take the Free 10% withdrawals each year and roll it over into my Vanguard 401 without paying any taxes. This has been working good the last two years.

You can take out 100% today, roll it back into the 401 and pay no taxes. So there is no “tax strategy” involved with these qualified funds. As I said above, I would strongly recommend that you pay the penalty on the final 30(?)% if necessary (I don’t know which year the annuity penalties end and which year you turn 70.5) in order to get all of the qualified funds out of this annuity before the year in which you turn 70.5 because of the mess it will make with your RMDs.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Bronco Billy
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Re: My Annuity Plan..as of now.

Post by Bronco Billy » Mon Jul 16, 2018 6:07 pm

Stinky wrote:
Mon Jul 16, 2018 11:34 am
Whatever you do, don't talk to another annuity salesman!!

Not sure I can make that promise. Annuity's are not the worst thing if you want SAFE money. I will need to make a decision on the Sentinel Annuity in July 2019. Right now I am leaning on a 1035 to Vanguard VA or pay taxes on all interest when it comes out.

Stinky thanks so much for your input.

smectym
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Re: My Annuity Plan..as of now.

Post by smectym » Mon Jul 16, 2018 11:49 pm

BroncoBilly, as now you know, post on this board about annuities and you’ll get a lot of expressions of horror, wrist-slapping and so on. It’s all well-intended and certainly there are some lousy annuity products out there. But you’re right, safety of principal can be an attractive feature of some fixed-rate annuities—and if I understand the products you own correctly, they do offer safety of principal and a fixed rate of return.

You say that upon maturity, you’re thinking of doing a 1035 exchange to move some assets into a Vanguard variable annuity (VA). That could be a wise move—though, of course, with a VA, you do encounter fluctuation of principal and thus greater risk—along with potentially greater reward—than with a fixed rate annuity. Vanguard does provide access to fixed rate products (issued by third party insurers) at relatively favorable rates as well. Poke around the Vanguard website, here’s the annuity portal https://investor.vanguard.com/annuity/w ... mpgn=PS:VA

Good luck,

Smectym

Bronco Billy
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Re: My Annuity Plan..as of now.

Post by Bronco Billy » Tue Jul 17, 2018 6:12 am

smectym wrote:
Mon Jul 16, 2018 11:49 pm
BroncoBilly, as now you know, post on this board about annuities and you’ll get a lot of expressions of horror, wrist-slapping and so on. It’s all well-intended and certainly there are some lousy annuity products out there. But you’re right, safety of principal can be an attractive feature of some fixed-rate annuities—and if I understand the products you own correctly, they do offer safety of principal and a fixed rate of return.

You say that upon maturity, you’re thinking of doing a 1035 exchange to move some assets into a Vanguard variable annuity (VA). That could be a wise move—though, of course, with a VA, you do encounter fluctuation of principal and thus greater risk—along with potentially greater reward—than with a fixed rate annuity. Vanguard does provide access to fixed rate products (issued by third party insurers) at relatively favorable rates as well. Poke around the Vanguard website, here’s the annuity portal https://investor.vanguard.com/annuity/w ... mpgn=PS:VA

Good luck,

Smectym
Thanks Smectym, I fired my FA because of how he handled my other money. This plan was to give me good income for the next 15 years to supplement my SS. He put me into HIGH cost SEI funds and was was making more money than me. I had been doing very good with Vanguard funds in my Scottrade account.

The 1035 exchange is more about not having to pay taxes once it comes out of maturity. Looks like the best option but I'm still open to other ideas.

Once again THANKS for all the input,
Bronco Billy

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