Looking for verification on Annuity pitch...

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ArchStanton67
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Looking for verification on Annuity pitch...

Post by ArchStanton67 » Sun Jun 28, 2020 5:19 pm

Looking through all the existing threads on this matter, I believe I know the answer... just want to verify.
I have a 401k from a former employer that was sitting in an account over at Principal. Long story short, we had a friend recommend their financial advisor over at Ameriprise. Looks like this may have been a bad idea...
Anyway, we started the process of working with them... seemed like a decent enough guy when we were talking about goals, etc. So we recently transferred my 401k money (540k) over to them. Once it hit they had someone contact me about putting most of the money into their "Riversource RAVA 5 Advantage" variable annuity. I don't know much about annuities other than the consensus seems to be they tend to be bad investments. So I received the prospectus and they want to put 500k of the money into this annuity which immediately made me uneasy. When my advisor called to follow up after the call with the person who pitched this to us, he even seemed to be concerned with that amount and they are no pitching 250k go into the annuity. This is the pitch on the performance;

https://1drv.ms/u/s!AqQefJsudidzh8o7HRh ... Q?e=MUOdrU

These returns are based on this ;

https://1drv.ms/u/s!AqQefJsudidzh8o7HRh ... Q?e=UAtlRV

They want us to decide on Tuesday. Right now all the funds we've transferred to Ameriprise is still in "cash". It has been put into anything.

So, since I haven't done any actual investing of my money with them yet... looking for input\advice as to what to do next. I assume the answer is "run" but I'm open to all suggestions

khart23
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Re: Looking for verification on Annuity pitch...

Post by khart23 » Sun Jun 28, 2020 5:36 pm

Financial planning should be like medicine: the tests (x-ray, mri, blood-tests, etc) should be a through, comprehensive look at your goals, values, income, taxes (2 years is typically the standard) and any concerns you may have.

From those tests we as financial professionals are able to prescribe a plan (much like a dr would write RX for everything from physical therapy to medication). But it should always be something that you have the link between why the advice fits your plan, showing that there is a complete detailed understanding of who you are/what you are looking to achieve.

In short though, just like a major medical decision it’s not uncommon that I get people who come just for a ‘second opinion’ because of the fiduciary registration. So I would say not to feel like it’s odd to go get a second opinion (even go in not telling the second advisor what’s been proposed-that way they don’t spend their time/energy just trying to refute what you were proposed and you get a more unbiased approach)

It’s worth the time and piece of mind to get the second opinion, especially because annuity contracts are not easy (or cheap) to break if you are out of the free-look period. Good luck!

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Nate79
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Re: Looking for verification on Annuity pitch...

Post by Nate79 » Sun Jun 28, 2020 5:39 pm

Run. Fast.

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David Jay
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Re: Looking for verification on Annuity pitch...

Post by David Jay » Sun Jun 28, 2020 5:51 pm

ArchStanton67 wrote:
Sun Jun 28, 2020 5:19 pm
This is the pitch on the performance;
https://1drv.ms/u/s!AqQefJsudidzh8o7HRh ... Q?e=MUOdrU
Do you understand that you can't ever get the money that is in the "Benefit Base". That is for calculation of annuitization payment only. Do you intend to annuitize? Do you require the income stream?
ArchStanton67 wrote:
Sun Jun 28, 2020 5:19 pm
They want us to decide on Tuesday.
And why might that be? You have to decide immediately because? What will happen if you don't decide by Tuesday?

Have you seen the withdrawal penalties? Without looking, I can tell you they are somewhere between 7 and 10 years. So you have to decide immediately but they can hold onto your money for 7 years???

Have you received the prospectus? I doubt you can read and absorb the prospectus by Tuesday.

[edit] Jane Quinn Bryant, a leading financial writer has this rule: "I don't buy anything I can't explain to a reasonably intelligent 12 year old."
Last edited by David Jay on Sun Jun 28, 2020 6:04 pm, edited 2 times in total.
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Re: Looking for verification on Annuity pitch...

Post by annu » Sun Jun 28, 2020 5:58 pm

Dont be hesitant to say no, to nice people. Sometimes people are nice to you for ulterior motives. You should be able to just do 3 fund orn4 fund or even 5 fund portfolio using ETF.

My wife has principal and yes it does not havr lots of options, dont know about ameriprise, but principal had extra fee to do self directed.
Annuities are not very useful to anyone but seller. Lots if info on the forum.

By the way what's happens on Wednesday if you say no? Hopefully you have not agreed or signed to anything.
And the nice guy you have been talking to, still asking for 250k, its like making someone choose between losing both legs or one leg, yes they will choose one leg, but I bet almost all will prefer not to lose anything.

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Re: Looking for verification on Annuity pitch...

Post by galawdawg » Sun Jun 28, 2020 6:00 pm

Welcome to Bogleheads!

Get out of Ameriprise while you can...

That kind of sales pitch with an artificial "deadline" is just the beginning of their efforts to sell you bad products with exorbitant fees.

Transfer your money to Vanguard, Fidelity, Schwab or E*TRADE as soon as possible. Come back here to the Wiki pages or post again on the message boards to get started on the path to making sound financial decisions!

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Re: Looking for verification on Annuity pitch...

Post by indexfundfan » Sun Jun 28, 2020 6:02 pm

Variable annuities usually earn fat commissions for the sales person (think 5% or more, or $12.5k on a $250k investment). I would be very wary.

I would not have transferred the money into Ameriprise in the first place. Don't invest the money at Ameriprise, transfer it out to Fidelity, Schwab or Vanguard.
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Re: Looking for verification on Annuity pitch...

Post by Savermom » Sun Jun 28, 2020 6:06 pm

Yes, get out, move to Vanguard or Fidelity. They are pushing the annuity because they get huge commissions from them!

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Nate79
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Re: Looking for verification on Annuity pitch...

Post by Nate79 » Sun Jun 28, 2020 6:14 pm

The nice guy, aka salesman, has a nickname for yku behind your back. Boat payment.

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sergeant
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Re: Looking for verification on Annuity pitch...

Post by sergeant » Sun Jun 28, 2020 6:18 pm

Run to Vanguard. Learn here. Invest accordingly. Stay away from Ameriprise and their offered annuities. Good luck and let us know what you end up doing.
AA- 20+ Years of Expenses Fixed Income/The remainder in Equities.

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Re: Looking for verification on Annuity pitch...

Post by Vanguard Fan 1367 » Sun Jun 28, 2020 6:24 pm

If you can get the money over to Vanguard or Fidelity I would recommend that. If it goes to a money market fund at say Vanguard then folks here will give you good advice on investing it and you don’t have to make a decision by Wednesday.
Last edited by Vanguard Fan 1367 on Sun Jun 28, 2020 6:25 pm, edited 1 time in total.
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Re: Looking for verification on Annuity pitch...

Post by Outer Marker » Sun Jun 28, 2020 6:25 pm

Yep, run, don't walk for the nearest exit. It was not clear from your initial post, but did your 401k distribution transfer into another tax protected account? Make sure you do this within 60 days of distribtuion so you are not hit with a major tax bill. Most likely your best course is an IRA at Vanguard or Fidelity. Do some reading and research before deciding to invest. You can post your situation here in "laura's format" and likely get better advice for free than from a paid advisor.

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Re: Looking for verification on Annuity pitch...

Post by nisiprius » Sun Jun 28, 2020 6:35 pm

NO. Never, ever, ever make an investment decision under time pressure.

No matter how good the "opportunity" looks.

If it is really something that's going to go away in a few days, it is not a kind of investment I should be investing in.

Variable annuities are usually bad, but they are always very complicated. Furthermore, the kinds of investments variable annuities over are pretty much like mutual funds--they are "always" going to be there, there isn't any "act now, supplies are limited."

The most likely reason for a "Tuesday" date is that it's the last day of the month and he has a sales quota to make.

Or, he just want to close the sale and does not want to give you the amount of time it takes to get oriented in what variable annuities are. Variable annuities are (intentionally?) complicated, the terms and conditions are never the same, they are very difficult to compare across companies.

The only time I seriously considered one, it came with a forty-page prospectus printed in smallish greyish type on onionskin paper. I tried to read it, but it was too much, so I just started counting the number of different kinds of fee it mentioned. I got to seven before I was halfway through the prospectus. And then I just shrugged and gave up.

You did receive a prospectus, right? You didn't just receive the glossy brochure printed on heavy stock full of pictures of smokin' hot senior couples, skipping down beaches holding hands and grinning at computer screens with jagged lines going up?
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Re: Looking for verification on Annuity pitch...

Post by Watty » Sun Jun 28, 2020 7:39 pm

David Jay wrote:
Sun Jun 28, 2020 5:51 pm
ArchStanton67 wrote: ↑Sun Jun 28, 2020 6:19 pm
They want us to decide on Tuesday.


And why might that be? You have to decide immediately because? What will happen if you don't decide by Tuesday?
I would suspect that is because Tuesday is the end of the month and the end of the quarter and there is some extra bonus they will get if they sell their quota of "manure" by the end of the quarter.

As another poster said "run!".

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David Jay
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Re: Looking for verification on Annuity pitch...

Post by David Jay » Sun Jun 28, 2020 7:43 pm

Watty wrote:
Sun Jun 28, 2020 7:39 pm
David Jay wrote:
Sun Jun 28, 2020 5:51 pm
ArchStanton67 wrote: ↑Sun Jun 28, 2020 6:19 pm
They want us to decide on Tuesday.


And why might that be? You have to decide immediately because? What will happen if you don't decide by Tuesday?
I would suspect that is because Tuesday is the end of the month and the end of the quarter and there is some extra bonus they will get if they sell their quota of "manure" by the end of the quarter.

As another poster said "run!".
Good point, I missed the end-of-quarter push.
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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David Jay
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Re: Looking for verification on Annuity pitch...

Post by David Jay » Sun Jun 28, 2020 7:48 pm

Arch -

You really need to leave Ameriprise. They have no investments that you want to purchase. Their AUM fee is unreasonable (higher than Edward Jones, which is also way too high).

Most here would recommend a low cost broker like Vanguard, Fidelity or Schwab. You work with the company receiving the money because they have the incentive to make things go smoothly. The 401K money (which I presume you rolled out to a traditional IRA?) can be moved to any investment you choose at any time with no tax consequence, so there is no need to be in a hurry and no need to be concerned about "making the right choice".

This site will walk you through the steps of investing, but you can start with an all-in-one fund until you are comfortable with your self-study.
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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Re: Looking for verification on Annuity pitch...

Post by PaleoWorx » Sun Jun 28, 2020 8:07 pm

annuity for a tax-advantaged account is stupid.
secondly, it's almost all of your money with them.
at 5% commission, your Ameriprise guy salivates at the potential 25k commission check. Whose interests do you think he has in mind at this point?

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Re: Looking for verification on Annuity pitch...

Post by Stinky » Sun Jun 28, 2020 8:11 pm

Arch Stanton67,

Welcome to the Forum!

Today is your lucky day. You had the wisdom and good fortune to post here before you made a mistake that would have cost you TENS of thousands of dollars.

The originally recommended $500k annuity would have subjected you to about 2% per year excess fees. You would have been trapped in the annuity for seven years to come, and you would have a surrender charge of $35k on the day after you signed the papers.

Oh yes - and the salesman would have made probably $25-$30k from the sale. That’s his motivation.

This is an example of how you will be treated if you stay with Ameriprise. High fee products with bad consumer value.

Run away. Take your money with you.
It's a GREAT day to be alive - Travis Tritt

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Nate79
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Re: Looking for verification on Annuity pitch...

Post by Nate79 » Sun Jun 28, 2020 8:40 pm

As others said Ameriprise is HORRIBLE.

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Re: Looking for verification on Annuity pitch...

Post by bikechuck » Sun Jun 28, 2020 8:46 pm

Vanguard Fan 1367 wrote:
Sun Jun 28, 2020 6:24 pm
If you can get the money over to Vanguard or Fidelity I would recommend that. If it goes to a money market fund at say Vanguard then folks here will give you good advice on investing it and you don’t have to make a decision by Wednesday.
Is there some reason or reasons that you prefer Fidelity and Vanguard to Schwab? I am not challenging you, I am just trying to learn.

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Re: Looking for verification on Annuity pitch...

Post by FiveK » Sun Jun 28, 2020 9:00 pm

ArchStanton67 wrote:
Sun Jun 28, 2020 5:19 pm
...we had a friend recommend their financial advisor over at Ameriprise. Looks like this may have been a bad idea...
Trust your instincts on "looks like...a bad idea" here.

If you call any of the brokerages suggested by previous posters (e.g., Fidelity, Schwab, Vanguard), the folks there will be happy to help you with the paperwork needed to move your money from Ameriprise to them. It's a common occurrence. :)

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Re: Looking for verification on Annuity pitch...

Post by Vanguard Fan 1367 » Sun Jun 28, 2020 9:08 pm

bikechuck wrote:
Sun Jun 28, 2020 8:46 pm
Vanguard Fan 1367 wrote:
Sun Jun 28, 2020 6:24 pm
If you can get the money over to Vanguard or Fidelity I would recommend that. If it goes to a money market fund at say Vanguard then folks here will give you good advice on investing it and you don’t have to make a decision by Wednesday.
Is there some reason or reasons that you prefer Fidelity and Vanguard to Schwab? I am not challenging you, I am just trying to learn.
Others here like Schwab. I think they do a good job also, I just have personal experience with Vanguard and Fidelity.
Upton Sinclair: "It is difficult to get a man to understand something when his salary depends on his not understanding it."

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Re: Looking for verification on Annuity pitch...

Post by adamthesmythe » Sun Jun 28, 2020 9:12 pm

Just say no.

To be clear, the strong negative opinion here concerns variable annuities and related instruments, not single premium immediate annuities.

With annuities the general rule is that if someone is trying hard to sell them, they are almost certainly not what you want.

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Re: Looking for verification on Annuity pitch...

Post by SB1234 » Sun Jun 28, 2020 9:28 pm

khart23 wrote:
Sun Jun 28, 2020 5:36 pm
Financial planning should be like medicine: the tests (x-ray, mri, blood-tests, etc) should be a through, comprehensive look at your goals, values, income, taxes (2 years is typically the standard) and any concerns you may have.

From those tests we as financial professionals are able to prescribe a plan (much like a dr would write RX for everything from physical therapy to medication). But it should always be something that you have the link between why the advice fits your plan, showing that there is a complete detailed understanding of who you are/what you are looking to achieve.

In short though, just like a major medical decision it’s not uncommon that I get people who come just for a ‘second opinion’ because of the fiduciary registration. So I would say not to feel like it’s odd to go get a second opinion (even go in not telling the second advisor what’s been proposed-that way they don’t spend their time/energy just trying to refute what you were proposed and you get a more unbiased approach)

It’s worth the time and piece of mind to get the second opinion, especially because annuity contracts are not easy (or cheap) to break if you are out of the free-look period. Good luck!
Wow this is a whopper if ever there was one.

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Re: Looking for verification on Annuity pitch...

Post by SevenBridgesRoad » Sun Jun 28, 2020 9:38 pm

SB1234 wrote:
Sun Jun 28, 2020 9:28 pm
khart23 wrote:
Sun Jun 28, 2020 5:36 pm
Financial planning should be like medicine: the tests (x-ray, mri, blood-tests, etc) should be a through, comprehensive look at your goals, values, income, taxes (2 years is typically the standard) and any concerns you may have.

From those tests we as financial professionals are able to prescribe a plan (much like a dr would write RX for everything from physical therapy to medication). But it should always be something that you have the link between why the advice fits your plan, showing that there is a complete detailed understanding of who you are/what you are looking to achieve.

In short though, just like a major medical decision it’s not uncommon that I get people who come just for a ‘second opinion’ because of the fiduciary registration. So I would say not to feel like it’s odd to go get a second opinion (even go in not telling the second advisor what’s been proposed-that way they don’t spend their time/energy just trying to refute what you were proposed and you get a more unbiased approach)

It’s worth the time and piece of mind to get the second opinion, especially because annuity contracts are not easy (or cheap) to break if you are out of the free-look period. Good luck!
Wow this is a whopper if ever there was one.
I was thinking this. Lord help us if retirement financial planning is run like the health care system. (I'm a retired doc and have eyes wide open to the craziness of our HC system...) Maybe if the first line of the post had been, "Financial planning should be like medicine is supposed to be...

Anyway, you are getting lots of great advice (second opinions) here!
Retired 2018 age 61/Variable Percentage Withdrawal method/One fund: VTINX all accounts/No mortgage,debt/Good enough | "Not using an alarm is one of the great glories of my life." Robert Greene

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Re: Looking for verification on Annuity pitch...

Post by bog007 » Sun Jun 28, 2020 10:40 pm

nisiprius wrote:
Sun Jun 28, 2020 6:35 pm
NO. Never, ever, ever make an investment decision under time pressure.

No matter how good the "opportunity" looks.

If it is really something that's going to go away in a few days, it is not a kind of investment I should be investing in.

Variable annuities are usually bad, but they are always very complicated. Furthermore, the kinds of investments variable annuities over are pretty much like mutual funds--they are "always" going to be there, there isn't any "act now, supplies are limited."

The most likely reason for a "Tuesday" date is that it's the last day of the month and he has a sales quota to make.

Or, he just want to close the sale and does not want to give you the amount of time it takes to get oriented in what variable annuities are. Variable annuities are (intentionally?) complicated, the terms and conditions are never the same, they are very difficult to compare across companies.

The only time I seriously considered one, it came with a forty-page prospectus printed in smallish greyish type on onionskin paper. I tried to read it, but it was too much, so I just started counting the number of different kinds of fee it mentioned. I got to seven before I was halfway through the prospectus. And then I just shrugged and gave up.

You did receive a prospectus, right? You didn't just receive the glossy brochure printed on heavy stock full of pictures of smokin' hot senior couples, skipping down beaches holding hands and grinning at computer screens with jagged lines going up?
Touche

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Re: Looking for verification on Annuity pitch...

Post by Dottie57 » Mon Jun 29, 2020 12:09 am

Run.

A cousin worked there but was let go. Turns out she wouldn’t **sell** the products she was supposed to sell. She is employed at another institution with a less aggressive sales stance. She has done fine as a FA but is not rich.

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Re: Looking for verification on Annuity pitch...

Post by Farmboyslim83 » Mon Jun 29, 2020 6:50 am

OP, what say ye?

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Re: Looking for verification on Annuity pitch...

Post by Jack FFR1846 » Mon Jun 29, 2020 7:41 am

When anyone types "Ameriprise", your computer should automatically play the music behind Darth Vader. They are used as the example of the absolute worse firms out there for ripping off their customers.
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Re: Looking for verification on Annuity pitch...

Post by NotWhoYouThink » Mon Jun 29, 2020 8:23 am

In case OP is still around:

The Ameriprise employees probably don't understand why this is a bad investment product for you, they just sell what they are trained to sell. They may consider themselves nice people and think they are trying to help you, but the product line they are trained to sell won't do that.

Your best bet is to thank them for their time, and move your money elsewhere, somewhere that the employees are trained and compensated differently.

Do you think you are willing to learn enough here to make your own decisions? Or do you want to pay someone else to manage your money. There are smart people who fall in either camp, but it makes sense to decide which one you are in before you can decide where to move your money.

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Re: Looking for verification on Annuity pitch...

Post by Stinky » Mon Jun 29, 2020 8:36 am

Farmboyslim83 wrote:
Mon Jun 29, 2020 6:50 am
OP, what say ye?
OP was back on the Board last night when about one-third of the responses had been posted.

I think that pretty much every response has carried the same message.

Hopefully OP has gotten the message.
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Re: Looking for verification on Annuity pitch...

Post by heyyou » Mon Jun 29, 2020 8:43 am

Having already typed this, I second what the others have more eloquently stated.

Not only does the sales person have a quota to meet, now is a very poor time to buy into any very long term financial product with fixed percentage payouts, because interest rates are quite low, and can only go slightly lower, or go up and up from here. Rising rates would help the annuity provider's financial viability, but not the current annuity buyers who are stuck with today's low rates.

The sellers know that better informed customers do not buy their high commission products, thus the emphasis on the urgency in the sales pitch to new customers. In your mind, the certainty of the stable income looks attractive, but the hidden risk is inflation that can occur over the long payout period of the annuity. As usual in a sales pitch, any current advantages are emphasized, and the costs and future risks are not mentioned, which are a major concern for your financial future.

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ArchStanton67
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Re: Looking for verification on Annuity pitch...

Post by ArchStanton67 » Mon Jun 29, 2020 10:15 am

OP here... I am overwhelmed by the responses - thank you all so much. I am still going through the responses but I'll catch up. In the meantime, I am transferring over some other small accounts I have over to the Schwab account I opened a few months ago and never funded.
The "hard date" I mentioned is coming from our advisor because "he wants to get our money to work ASAP". He hasn't mentioned any pressing needs beyond that.
I'll catch up on some of the questions you've asked and respond ASAP

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Re: Looking for verification on Annuity pitch...

Post by Stinky » Mon Jun 29, 2020 10:32 am

ArchStanton67 wrote:
Mon Jun 29, 2020 10:15 am

The "hard date" I mentioned is coming from our advisor because "he wants to get our money to work ASAP".
As mentioned above, the advisor salesman wants to meet his month end quota and maybe get a bonus. That’s the urgency for tomorrow.

Don’t trust anything the salesman tells you. You’ve gotten better advice here than you will ever get from Ameriprise.
It's a GREAT day to be alive - Travis Tritt

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Re: Looking for verification on Annuity pitch...

Post by jabberwockOG » Mon Jun 29, 2020 11:03 am

ArchStanton67 wrote:
Mon Jun 29, 2020 10:15 am
OP here... I am overwhelmed by the responses - thank you all so much. I am still going through the responses but I'll catch up. In the meantime, I am transferring over some other small accounts I have over to the Schwab account I opened a few months ago and never funded.
The "hard date" I mentioned is coming from our advisor because "he wants to get our money to work ASAP". He hasn't mentioned any pressing needs beyond that.
I'll catch up on some of the questions you've asked and respond ASAP
You are about to get skinned alive by the sales weasels at Ameriprise. Variable annuities customers are how brokers get rich and pay their kids tuition. Suggest you open a Fidelity, Schwab, or Vanguard account today and ask them to transfer (doing a pull) all funds from the Ameriprise account asap. Politely but firmly, and in no uncertain terms, say NO, hell NO to any more sales pitch from the conmen at Ameriprise.

Set up a simple super low cost 3 fund portfolio with Fidelity or Vanguard and for check it every few months. At some point in the distant future you may want to buy a low cost immediate annuity, especially if interest rates recover and revert to more average historical rates. There is a time and place to smartly use an immediate annuity.
Last edited by jabberwockOG on Mon Jun 29, 2020 11:09 am, edited 2 times in total.

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Re: Looking for verification on Annuity pitch...

Post by galawdawg » Mon Jun 29, 2020 11:08 am

ArchStanton67 wrote:
Mon Jun 29, 2020 10:15 am
The "hard date" I mentioned is coming from our advisor because "he wants to get our money to work ASAP".
Wow...that is rich! Will he also throw in undercoating, paint protection and floor mats if you do it by tomorrow?? :shock: :D

I suspect that what the Ameriprise salesman meant is "he wants to get your money to work FOR HIM as soon as possible."

If you already opened an account at Schwab, you may want to go ahead and move your money there. That is a well-regarded brokerage by many here. But get your money out of Ameriprise quickly...their fees will add up. If Ameriprise charges a transfer-out fee or account closure fee, check with Schwab before you move your money, they may reimburse you for any Ameriprise fees.

Are you familiar with how to determine what asset allocation is best for you? If not, you may want to take a look at the wiki here: https://www.bogleheads.org/wiki/Asset_allocation

Do you know about creating a two or three fund portfolio using low-cost index funds? https://www.bogleheads.org/wiki/Three-fund_portfolio

You may look at a two or three fund portfolio comprised of VTI (Vanguard Total Stock Index ETF), BND (Vanguard Total Bond Index ETF) and if you want international exposure, VSUX (Vanguard International Index ETF). I prefer Vanguard mutual funds, but those have transaction fees at Schwab. I believe the comparable Vanguard ETF versions do not have any transaction fees or commissions (but someone more familiar with Schwab can correct me if I am wrong about that).

Feel free to return with questions or concerns! You'll find lots of helpful folks here with a wide range of experience and expertise.

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mickeyd
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Re: Looking for verification on Annuity pitch...

Post by mickeyd » Mon Jun 29, 2020 11:32 am

Run away, Run away. But first, transfer your entire stash to VG.
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle

Topic Author
ArchStanton67
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Joined: Sun Jun 28, 2020 2:45 pm

Re: Looking for verification on Annuity pitch...

Post by ArchStanton67 » Mon Jun 29, 2020 12:28 pm

Thank you all again for your insight... I am going through all of the reading recommendations and have a lot of homework now.
One thing about the three fund portfolio... I saw a thread here that mentioned "SPDR S&P 500 ETF". This seems like an intriguing ETF but I don't see it recommended as a place to put any money. Is there a reason?


This is our current situation. I do have a Schwab account ready to fund when ready.

Emergency funds: 65k

Debt: 1600 on Amex
240k left on Mortgage

Tax Filing Status: Married Filing Jointly (no kids)


Tax Rate: 22% Federal, 9.3% State

State of Residence: CA

Age: Me 53, Wife 52

I have no idea as to any preferences on allocation mixes


Our assets (such as it is) can be broken down as such

520k from a 401k from former employer. Currently sitting in a brokerage account at Ameriprise (for the time being..)
73k in my wifes 403b - I am tracking down as to what kind of investments are offered

I have 8200 in an IRA at Morgan Stanley
She has 12000 in an IRA there as well.
Both are in the fund MAMAX

I have another 7k being transferred over to Schwab

Any input is greatly appreciated

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galawdawg
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Location: Georgia

Re: Looking for verification on Annuity pitch...

Post by galawdawg » Mon Jun 29, 2020 1:17 pm

I believe the SPDR S&P 500 ETF (SPY) is about the same as VOO, the Vanguard 500 Index ETF. The expense ratio of SPY is 0.09% which is very low but not quite as low as VOO at 0.03%. As a result, the returns on VOO are slightly higher than SPY. Either would be fine for an S&P 500 index fund.

You can also ask Schwab about any account transfer bonus offers. I don't know if they have any current offers, but it doesn't hurt to ask.

ThermoMaster
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Joined: Thu Jun 14, 2018 1:21 pm

Re: Looking for verification on Annuity pitch...

Post by ThermoMaster » Mon Jun 29, 2020 1:46 pm

ArchStanton67 wrote:
Mon Jun 29, 2020 12:28 pm
Our assets (such as it is) can be broken down as such

520k from a 401k from former employer. Currently sitting in a brokerage account at Ameriprise (for the time being..)
73k in my wifes 403b - I am tracking down as to what kind of investments are offered

I have 8200 in an IRA at Morgan Stanley
She has 12000 in an IRA there as well.
Both are in the fund MAMAX

I have another 7k being transferred over to Schwab

Any input is greatly appreciated
Are you saying they had you move the money from a tax advantaged account to a non tax advantaged account? Or are you just using brokerage account as a generic term?

Topic Author
ArchStanton67
Posts: 4
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Re: Looking for verification on Annuity pitch...

Post by ArchStanton67 » Mon Jun 29, 2020 1:58 pm

Ameriprise lists them as brokerage accounts. The funds are split up in two separate brokerage accounts; One is an IRA, the other a "ROTH CONTRIBUTORY IRA"
They are both in cash at the moment

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Watty
Posts: 19730
Joined: Wed Oct 10, 2007 3:55 pm

Re: Looking for verification on Annuity pitch...

Post by Watty » Mon Jun 29, 2020 2:16 pm

ArchStanton67 wrote:
Mon Jun 29, 2020 12:28 pm
I saw a thread here that mentioned "SPDR S&P 500 ETF". This seems like an intriguing ETF but I don't see it recommended as a place to put any money. Is there a reason?
There are several different ETFs and Mutual funds that track the S&P 500 index and there are only minor differences between them.

These basically track the 500 biggest US companies. These were some of the original stock index funds that started back in the 1970s when trading costs were a lot higher and computers were very limited so trying to track an index that included more small companies would have been very expensive and difficult.

Now instead of the S&P 500 Index there are Total Stock Market Index funds that track all the publicly traded US stocks so that is generally considered to be a better choice now than the S&P 500 Index funds. There is a lot of overlap since about 75% of the Total Stock Market fund is the S&P 500 index. Since there is so much overlap there is also not a huge difference in performance when you look at the history.

Anyway if your are reading something that talks about using an S&P 500 index fund you can mentally substitute Total Stock Market Index funds and if you actually purchase something you would want to purchase a Total Stock Market Index fund instead of a S&P 500 index fund.

There is a getting started wiki and the Boglehead books that might be useful to you to learn more if you have not seen those.

https://www.bogleheads.org/wiki/Getting_started

https://www.amazon.com/s?k=Bogleheads&t ... ads.org-20

It is not directly related to your situation but there is also a wiki on how to manage a windfall, like an inheritance, and one of the big points is that it is OK to take six month or longer to learn and come up with a long term plan so it is OK to to park your money someplace very safe while you are figuring out what to do. There is no hurry.

https://www.bogleheads.org/wiki/Managing_a_windfall

One alternative that has not been mentioned is that if you would like help with setting up your investments you can have Vanguard so it for you an their fee is only 0.3% of your portfolio and they will not put you into bad investments. You could also just pay that for a year or two to get your investments organized and on automatic pilot then stop paying that fee and manage it yourself.

https://investor.vanguard.com/financial ... r-services

Doctor Rhythm
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Re: Looking for verification on Annuity pitch...

Post by Doctor Rhythm » Mon Jun 29, 2020 3:32 pm

ArchStanton67 wrote:
Mon Jun 29, 2020 12:28 pm

I have 8200 in an IRA at Morgan Stanley
She has 12000 in an IRA there as well.
Both are in the fund MAMAX
...
Any input is greatly appreciated
MAMAX is a moderate allocation fund that puts about 60% of your investment in stocks and 40% in a bonds/cash. It has a 0.96% expense ratio and a 5.75% front load (i.e., a commission fee you pay at the time of purchase). These costs should be hard-stop, no-way-in-the-world reasons to avoid a fund. If you want a moderate allocation fund, you can invest in one at Vanguard/Schwab/Fidelity with an expense ratio of around 0.15% or less and no load fees.

You actually might want to consider using a target date retirement fund in your tax-deferred accounts, since you don't have a lot of experience managing your investments (or even if you do). In a tax-deferred account, you could invest in the fund, and later (if you want to take a more hands on approach), you could switch to other funds without paying tax on gains. I like to say that target date funds are never the best option; they're simply much better than the majority of alternatives (like a variable annuity) for the majority of investors. Someone else here likes to say that if you don't know whether a target date fund is right for you, it probably is.

heyyou
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Re: Looking for verification on Annuity pitch...

Post by heyyou » Mon Jun 29, 2020 7:52 pm

Some levity:
My Ameriprise advisor helped me to put two kids through college, but it was his kids, not mine.

steelerfan1
Posts: 14
Joined: Sun Apr 05, 2020 5:58 pm

Re: Looking for verification on Annuity pitch...

Post by steelerfan1 » Tue Jun 30, 2020 4:55 pm

ArchStanton67 wrote:
Sun Jun 28, 2020 5:19 pm
Looking through all the existing threads on this matter, I believe I know the answer... just want to verify.
I have a 401k from a former employer that was sitting in an account over at Principal. Long story short, we had a friend recommend their financial advisor over at Ameriprise. Looks like this may have been a bad idea...
Anyway, we started the process of working with them... seemed like a decent enough guy when we were talking about goals, etc. So we recently transferred my 401k money (540k) over to them. Once it hit they had someone contact me about putting most of the money into their "Riversource RAVA 5 Advantage" variable annuity. I don't know much about annuities other than the consensus seems to be they tend to be bad investments. So I received the prospectus and they want to put 500k of the money into this annuity which immediately made me uneasy. When my advisor called to follow up after the call with the person who pitched this to us, he even seemed to be concerned with that amount and they are no pitching 250k go into the annuity. This is the pitch on the performance;

https://1drv.ms/u/s!AqQefJsudidzh8o7HRh ... Q?e=MUOdrU

These returns are based on this ;

https://1drv.ms/u/s!AqQefJsudidzh8o7HRh ... Q?e=UAtlRV

They want us to decide on Tuesday. Right now all the funds we've transferred to Ameriprise is still in "cash". It has been put into anything.

So, since I haven't done any actual investing of my money with them yet... looking for input\advice as to what to do next. I assume the answer is "run" but I'm open to all suggestions
I'm sure you've got all the answers you need, but...

We just spent 7 years with Ameriprise in a RAVA5. It was a 10 year policy, but what also is just peachy is that every contribution begins a new 10 year cycle over for that particular deposit. We had to pay quite a large penalty to get out of it and finally get our funds transferred over to Vanguard. Not to mention the time out of the market to complete the process. We also made horrible returns in the plan to boot. Our planner sure loved us though.

Just wanted to add my experience. Good Luck

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David Jay
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Re: Looking for verification on Annuity pitch...

Post by David Jay » Tue Jun 30, 2020 8:46 pm

I have looked at a fair number of Equity Indexed Annuities, but I had not gone through the prospectus of a Variable Annuity. The prospectus is available online.

If one purchases the annuity with no riders, the least expensive fund in the fund list (.39%), with a 7-year penalty period (you can save 0.15% by agreeing to a 10 year withdrawal penalty schedule), the lowest possible cost for a $250,000 policy is 1.51%. The range of fund ERs is .39% to 2.78% :shock:

Arch:

So if you add your financial advisor annuity salesman's AUM fee, Ameriprise will take between 3.01% and 5.40% of your return every year, depending on the fund(s) selected.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

ThermoMaster
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Re: Looking for verification on Annuity pitch...

Post by ThermoMaster » Tue Jun 30, 2020 9:18 pm

David Jay wrote:
Tue Jun 30, 2020 8:46 pm
So if you add your financial advisor annuity salesman's AUM fee, Ameriprise will take between 3.01% and 5.40% of your return every year, depending on the fund(s) selected.
:shock: That’s.... truly disturbing.

Also, the “deadline” has passed and I’m hoping we get an update from the OP

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William4u
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Re: Looking for verification on Annuity pitch...

Post by William4u » Tue Jun 30, 2020 9:20 pm

This looks very bad. Ameriprise + Annuity = Run Away!

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David Jay
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Location: Michigan

Re: Looking for verification on Annuity pitch...

Post by David Jay » Tue Jun 30, 2020 10:30 pm

ThermoMaster wrote:
Tue Jun 30, 2020 9:18 pm
David Jay wrote:
Tue Jun 30, 2020 8:46 pm
So if you add your financial advisor annuity salesman's AUM fee, Ameriprise will take between 3.01% and 5.40% of your return every year, depending on the fund(s) selected.
:shock: That’s.... truly disturbing.

Also, the “deadline” has passed and I’m hoping we get an update from the OP
And that assumes that the annuity salesperson did not talk him into adding a few riders...
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

reln
Posts: 296
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Re: Looking for verification on Annuity pitch...

Post by reln » Tue Jun 30, 2020 10:57 pm

ArchStanton67 wrote:
Sun Jun 28, 2020 5:19 pm
Looking through all the existing threads on this matter, I believe I know the answer... just want to verify.
I have a 401k from a former employer that was sitting in an account over at Principal. Long story short, we had a friend recommend their financial advisor over at Ameriprise. Looks like this may have been a bad idea...
Anyway, we started the process of working with them... seemed like a decent enough guy when we were talking about goals, etc. So we recently transferred my 401k money (540k) over to them. Once it hit they had someone contact me about putting most of the money into their "Riversource RAVA 5 Advantage" variable annuity. I don't know much about annuities other than the consensus seems to be they tend to be bad investments. So I received the prospectus and they want to put 500k of the money into this annuity which immediately made me uneasy. When my advisor called to follow up after the call with the person who pitched this to us, he even seemed to be concerned with that amount and they are no pitching 250k go into the annuity. This is the pitch on the performance;

https://1drv.ms/u/s!AqQefJsudidzh8o7HRh ... Q?e=MUOdrU

These returns are based on this ;

https://1drv.ms/u/s!AqQefJsudidzh8o7HRh ... Q?e=UAtlRV

They want us to decide on Tuesday. Right now all the funds we've transferred to Ameriprise is still in "cash". It has been put into anything.

So, since I haven't done any actual investing of my money with them yet... looking for input\advice as to what to do next. I assume the answer is "run" but I'm open to all suggestions
This is a mostly anti annuity forum. Don't listen to us too much. Do whatever you feel is best for you and your family. Some people are better off in a crappy annuity that they trust in and stick with than in the basically free mutual funds that they then panic sell.
I'm in the cheap mutual funds myself and I've never panic sold anything; thank goodness for Jack Bogle.

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