Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

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Readyinvestor
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Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by Readyinvestor » Mon Nov 13, 2017 9:49 pm

All,

Good evening. Just recently parted with our advisor and completely reorganized our portfolio the 3-fund way – 70% stock and 30% Bond (50 US, 20% INTL, 30 Intermediate Bonds). :sharebeer THANK YOU all for all of your help - I am really grateful.
Schwab Family:
SCHB and SWTSX (Total Stock Market)
SWAGX (Total Bond)
SWISX (Int'll)

Her Roth IRA Annuity :confused : One of the last things to do is to figure out if we should keep “her” in her fixed index annuity Roth IRA or get out of it and how. :oops:

I have provided as much info as I can here --- there is more on the website and statement --- please tell me what you need to help understand what we have gotten into.

Product name: Allianz 222 Fixed Index Annuity
Tax Plan Type: Roth IRA
Status: Inforce
Policy Effective Date: May 2016
Next anniversary date: May 2016 (I can change the allocation between now and then)

Currently Allocated:
• Nasdaq 100 Monthly Sum 50%
• S&P 500 Monthly Sum 50%

Choices are:
• S&P 500 Index
• Nasdaq 100 index
• Blended Index*
• Russel 200 Index
• Barclays US Dynamic Balance Index II w/cap (Huh?)
• Barclays US Dynamic Balance Index II w/spread (Huh?)
• Pimco Tactical Balanced Index

*The blended index is made up of the following indexes (and index weights):
• Dow Jones Industrial Average 35%
• Barclays Capital US Aggregate Bond Index 35%
• Euro STOXX 50 20%
• Russel 2000 Index 10%

I believe the sliding scale for the surrender charge is 10% the first year minus 1% every year after until the 10th year when it is 0%.

Allianz: During the first 10 years, a surrender charge and MVA will apply if the contract is partially or fully surrendered. These charges may result in a loss of indexed interest and fixed interest, interest bonus, and a partial loss of principal (premium).

Thank you again.

Vr RI

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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by itstoomuch » Mon Nov 13, 2017 9:59 pm

Depends :mrgreen: :annoyed :oops:
What was the original reason for using FIA?
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by itstoomuch » Mon Nov 13, 2017 11:16 pm

The exit strategy: Do it Now because have a better alternative plan.
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by Readyinvestor » Tue Nov 14, 2017 5:32 am

itstoomuch wrote:
Mon Nov 13, 2017 9:59 pm
Depends :mrgreen: :annoyed :oops:
What was the original reason for using FIA?
The original motivation was my wife's risk tolerance. She was skeptical of the stock market (prob still is) - I had high tolerance, she had low tolerance so the advisor offered an annuity and put me in US stocks. The surveys have her moderately conservative and me at 100% stock though that seems like too much for me. After reading a bunch this year - Bernstein, Boglehead, etc. we settled on 70/30(bond). Now we are trying to get her to 70/30 and this annuity is in the way.

We never understood the annuity and prob still don't - the advisor explained it several times: income protection rider?, cap on earnings but guaranteed, etc. Even when I read about it I don't understand it.

I assume the amt of the surrender fee is the ACCUMULATON VALUE - CASH SURRENDER VALUE = SURRENDER FEE. That seems to be 12% which does not jive with the 10% sliding scale but may be the add'l MVA fee?

Thoughts?

Best RI

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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by Readyinvestor » Tue Nov 14, 2017 5:34 am

itstoomuch wrote:
Mon Nov 13, 2017 11:16 pm
The exit strategy: Do it Now because have a better alternative plan.
Thank you itstoomuch. I understand the "do it now" part. Can you explain a little - so regardless of the fee? In this case it seems like its going to be about in the thousands to get out if I am reading the statement correctly.

Thank you and best, RI

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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by itstoomuch » Tue Nov 14, 2017 11:11 am

If you have an exit plan then do it. And that exit plan should be equal to or better than the FIA. It is better to own something that you understand than own something that you don't and includes Indexes. So will the FIA meet your objectives and if not then what does and at what current and future cost? JMO.

I assume that you have read my signature line? but to reiterate, My wife also has a couple of FIA's purchased in 2012 and first withdrawals in 2017 as her RMD. We own no bonds using deferred annuities as bond substitute and risk transference to the annuity company. At the time I designed our future Income to be about thirds: SS+small pension; GLWB annuities VA +FIA; and Discretionary Equity. Since 2015 we acquired a Rental which established a new allocation of approx 25% to each Income bucket. We can survive on any 2 buckets. The Discretionary can be highly variable in that I am a fairly active trader since 2012.

Original purpose of the GLWB annuities was 1) Insurance; 2) Income; 3) Investment features; 4) Ancillary features. Today, the Ancillary features are becoming relatively more important. I adhere to William Bernstein's phases of investing for retirement. I've used Funding Ratio philosophy for decades and annuities fit well in securing a stable and predictable income that can minimize economic upheavals.

I spent many months examining GLWB variable and Fixed Income annuities and looking at alternatives.
My FA stopped offering FI annuities as part of a retirement strategy. I am ambivalent.
YMMV
Last edited by itstoomuch on Tue Nov 14, 2017 12:33 pm, edited 1 time in total.
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by jimishooch » Tue Nov 14, 2017 11:49 am

i'm in the same boat,

have multiple deferred (income) indexed annuities with 3 years left on a 10 year surrender and the charges are still to steep so i re-evaluate every year.
but i don't include these in my asset allocation as it's an income producing vehicle like social security...

good luck
jim

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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by bsteiner » Tue Nov 14, 2017 12:02 pm

jimishooch wrote:
Tue Nov 14, 2017 11:49 am
...
have multiple deferred (income) indexed annuities with 3 years left on a 10 year surrender and the charges are still to steep so i re-evaluate every year. ...
The surrender charges make up for some of the expenses that the insurance company would otherwise receive. So the surrender charges shouldn't be a factor in the decision.

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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by jimishooch » Tue Nov 14, 2017 12:22 pm

bsteiner wrote:
Tue Nov 14, 2017 12:02 pm
jimishooch wrote:
Tue Nov 14, 2017 11:49 am
...
have multiple deferred (income) indexed annuities with 3 years left on a 10 year surrender and the charges are still to steep so i re-evaluate every year. ...
The surrender charges make up for some of the expenses that the insurance company would otherwise receive. So the surrender charges shouldn't be a factor in the decision.
i would think twice if the surrender charges eat into the original principal premium...

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Mel Lindauer
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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by Mel Lindauer » Tue Nov 14, 2017 4:03 pm

Lower costs at another provider can more than make up for the surrender fee if held for a long enough period of time. It's irrelevant if the surrender fee eats into the original investment or not.

Do the math. Compare what you're paying now vs what you'd be paying at a low-cost place like Vanguard. Then divide the annual savings into the surrender fee to get the payback period. It's a simple math problem; it's not rocket science.
Best Regards - Mel | | Semper Fi

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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by KSActuary » Tue Nov 14, 2017 4:11 pm

Does the annuity allow for a 10% withdrawal each year where the surrender charge does not apply?

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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by sergeant » Tue Nov 14, 2017 9:43 pm

I'd run from the annuity into something way better. I'm only commenting cause I'm wondering what this FA put you into?
Lincoln 3 EOW!

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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by David Jay » Tue Nov 14, 2017 11:24 pm

You will lose much more than 1% per year (likely 2.5% to 3%) to keep the fixed index annuity. The surrender fee is a bargain compared with keeping these "stinkers".

FINRA, the government chartered regulatory organization, has issued an alert on those products: https://www.finra.org/investors/alerts/ ... lex-choice
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: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by itstoomuch » Wed Nov 15, 2017 12:33 am

OP, I suggest you ask questions.
One question, I would ask is Why I am ambivalent and have kept the GLWB FIa for the last 5 years and have started withdrawals last month?
:mrgreen: :moneybag :greedy
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by Readyinvestor » Sat Nov 18, 2017 6:30 am

itstoomuch wrote:
Tue Nov 14, 2017 11:11 am
If you have an exit plan then do it.
We own no bonds using deferred annuities as bond substitute and risk transference to the annuity company.
Thank you for your post. Busy week, still trying to understand all of your points. I don't have an exit plan - trying to figures out some COAs.

Interesting what you said about NO BONDS. some of the other replies indicate they don't include the makeup (stocks/bonds) of their annuities in their overall allocation. Ours is all stocks. Does that mean it doesn't matter since it cannot lose money and on the flip side it has a cap so i should always try to max the cap on earnings each month? ugh.

Thank you agian. Vr/ RI

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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by Readyinvestor » Sat Nov 18, 2017 6:37 am

jimishooch wrote:
Tue Nov 14, 2017 11:49 am
i'm in the same boat,

have multiple deferred (income) indexed annuities with 3 years left on a 10 year surrender and the charges are still to steep so i re-evaluate every year.
but i don't include these in my asset allocation as it's an income producing vehicle like social security...

good luck
jim
Jim,
Thank you! Can you explain a little why you "don't include these in my asset allocation as it's an income producing vehicle like social security" ?

I will have SS and a military pension --- and the wife has this annuity --- this post has caused me some confusion as to how to allocate (what to include in my allocation). I am fine with 70/30 --- but I have

his taxable
his TSP
his ROTH IRA
her ROTH IRA (The annuity this post is about)

--- I don't currently include education savings in my retirement allocation:
Kid 1 ESA
Kid 1 Taxable
Kid 2 ESA
Kid 2 Taxable
Future his pension

What do all you include in your retirement allocation calculus?

Vr RI

Readyinvestor
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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by Readyinvestor » Sat Nov 18, 2017 6:38 am

bsteiner wrote:
Tue Nov 14, 2017 12:02 pm
jimishooch wrote:
Tue Nov 14, 2017 11:49 am
...
have multiple deferred (income) indexed annuities with 3 years left on a 10 year surrender and the charges are still to steep so i re-evaluate every year. ...
The surrender charges make up for some of the expenses that the insurance company would otherwise receive. So the surrender charges shouldn't be a factor in the decision.
Thank you for your post. I have to be honest, I don't yet understand the fees (surrender, MVA and any other fee I don't know about, etc). Trying to figure that out.

Vr RI

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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by Readyinvestor » Sat Nov 18, 2017 7:03 am

Mel Lindauer wrote:
Tue Nov 14, 2017 4:03 pm
Lower costs at another provider can more than make up for the surrender fee if held for a long enough period of time. It's irrelevant if the surrender fee eats into the original investment or not.

Do the math. Compare what you're paying now vs what you'd be paying at a low-cost place like Vanguard. Then divide the annual savings into the surrender fee to get the payback period. It's a simple math problem; it's not rocket science.
Thank you for your reply --- I am going to try to do what you describe. Tongue and cheek --> It was not Fourier Series that gave me trouble - it's the restaurant math the kills me :oops:

What i am paying now: investing $460 per month. I know that is not what you mean, but I don't know yet what i am paying in fees or how to know. I just know there is a surrender fee -- and when i look at the statement it looks the surrender amt is due to a fee that seems to be higher than 9% (i started at 10% and have had it 1+ years). I think it's about 5500.

I get that my Schwab funds for a roth ira (mine and hers eventually) are about 0.03%/year -- intuitively, that has to be better than an annuity --- esp since there is not cap on my Schwab investment --- but i don't know the fees enough to know how much.

I think i need to FIA FEE/yr - 0.03%/yr = Difference in Fee --- assume FIA FEE = 3% so difference is 2.97%.
If FIA = 50,000 then the fees are $1500/yr vice $15 for a .03%/yr fee
So difference is ---- 1500-15=1485/yr difference.
5500 / 1485 = 3.7 yrs to get back to even after leaving the annuity? or at least get back the surrender fee of 5500.

How does my rocket science look?

Is there an average that annuities cost so I can do some math and be done with this? I don't want to nuke it to death.

Thanks again. Vr RI

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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by Readyinvestor » Sat Nov 18, 2017 7:06 am

David Jay wrote:
Tue Nov 14, 2017 11:24 pm
You will lose much more than 1% per year (likely 2.5% to 3%) to keep the fixed index annuity. The surrender fee is a bargain compared with keeping these "stinkers".

FINRA, the government chartered regulatory organization, has issued an alert on those products: https://www.finra.org/investors/alerts/ ... lex-choice
Thank you! I am crunching the math and used 3% in a previous reply to try and start nugging this out. I will check out the article.
Thanks agian. Vr RI

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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by Readyinvestor » Sat Nov 18, 2017 7:08 am

sergeant wrote:
Tue Nov 14, 2017 9:43 pm
I'd run from the annuity into something way better. I'm only commenting cause I'm wondering what this FA put you into?
Pretty sure i will run into something better --- I am finally almost out of all that he put me into. Of the 15 funds i had just for my roth ira , only one remains --> SCHB. It's a 3 fund strategy now.

Thank you again. Vr RI

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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by itstoomuch » Sat Nov 18, 2017 12:02 pm

Readyinvestor wrote:
Sat Nov 18, 2017 6:30 am
itstoomuch wrote:
Tue Nov 14, 2017 11:11 am
If you have an exit plan then do it.
We own no bonds using deferred annuities as bond substitute and risk transference to the annuity company.
Thank you for your post. Busy week, still trying to understand all of your points. I don't have an exit plan - trying to figures out some COAs.

Interesting what you said about NO BONDS. some of the other replies indicate they don't include the makeup (stocks/bonds) of their annuities in their overall allocation. Ours is all stocks. Does that mean it doesn't matter since it cannot lose money and on the flip side it has a cap so i should always try to max the cap on earnings each month? ugh.

Thank you agian. Vr/ RI
A concurrent thread is running on GLWB Variable is asking the same thing as you are asking. viewtopic.php?p=3623452#p3623452
There are slight differences between a GLWB Variable vs GLWB Fixed Index that IMO are complementary to each other.
We have NO BONDS because the GLWBs' have enough guarantees and stability to function as a bond component and with less interest rate risk.
In the long view, which is Now, we (spouse 70.5) is taking Income from the GLWB FIa in a RMD. There is another quirk in the GLWB FIa for those starting RMD.
I am willing to pay the 3.5% fees for the guarantees and features that a self-directed S/B Index/MF cannot do without considerable financial knowledge and risk.
YMMV
Last edited by itstoomuch on Sat Nov 18, 2017 12:24 pm, edited 1 time in total.
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by Mel Lindauer » Sat Nov 18, 2017 12:20 pm

Readyinvestor wrote:
Sat Nov 18, 2017 7:03 am
Mel Lindauer wrote:
Tue Nov 14, 2017 4:03 pm
Lower costs at another provider can more than make up for the surrender fee if held for a long enough period of time. It's irrelevant if the surrender fee eats into the original investment or not.

Do the math. Compare what you're paying now vs what you'd be paying at a low-cost place like Vanguard. Then divide the annual savings into the surrender fee to get the payback period. It's a simple math problem; it's not rocket science.
Thank you for your reply --- I am going to try to do what you describe. Tongue and cheek --> It was not Fourier Series that gave me trouble - it's the restaurant math the kills me :oops:

What i am paying now: investing $460 per month. I know that is not what you mean, but I don't know yet what i am paying in fees or how to know. I just know there is a surrender fee -- and when i look at the statement it looks the surrender amt is due to a fee that seems to be higher than 9% (i started at 10% and have had it 1+ years). I think it's about 5500.

I get that my Schwab funds for a roth ira (mine and hers eventually) are about 0.03%/year -- intuitively, that has to be better than an annuity --- esp since there is not cap on my Schwab investment --- but i don't know the fees enough to know how much.

I think i need to FIA FEE/yr - 0.03%/yr = Difference in Fee --- assume FIA FEE = 3% so difference is 2.97%.
If FIA = 50,000 then the fees are $1500/yr vice $15 for a .03%/yr fee
So difference is ---- 1500-15=1485/yr difference.
5500 / 1485 = 3.7 yrs to get back to even after leaving the annuity? or at least get back the surrender fee of 5500.

How does my rocket science look?

Is there an average that annuities cost so I can do some math and be done with this? I don't want to nuke it to death.

Thanks again. Vr RI
Your math looks good. As you can see, the payback period is very short and from then on, you're putting that saved money in YOUR pocket rather than the insurance company's pocket.

One thing to consider is when your next anniversary date is, since the surrender fee normally goes down by 1% per year. So, if you're real close to an anniversary date, make your move after that date. Otherwise, I'd do it now and not look back.
Best Regards - Mel | | Semper Fi

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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by jimishooch » Sun Nov 19, 2017 1:14 pm

Readyinvestor wrote:
Sat Nov 18, 2017 6:37 am
jimishooch wrote:
Tue Nov 14, 2017 11:49 am
i'm in the same boat,

have multiple deferred (income) indexed annuities with 3 years left on a 10 year surrender and the charges are still to steep so i re-evaluate every year.
but i don't include these in my asset allocation as it's an income producing vehicle like social security...

good luck
jim
Jim,
Thank you! Can you explain a little why you "don't include these in my asset allocation as it's an income producing vehicle like social security" ?

I will have SS and a military pension --- and the wife has this annuity --- this post has caused me some confusion as to how to allocate (what to include in my allocation). I am fine with 70/30 --- but I have

his taxable
his TSP
his ROTH IRA
her ROTH IRA (The annuity this post is about)

--- I don't currently include education savings in my retirement allocation:
Kid 1 ESA
Kid 1 Taxable
Kid 2 ESA
Kid 2 Taxable
Future his pension

What do all you include in your retirement allocation calculus?

Vr RI
it's up to you whether to include the annuity in your AA or not. but since it is going away it's a moot point...
this is why i don't include mine:
1) it's an insurance product not an investment.
2) i don't include income producing vehicles (like SS) in my AA.
it's a personal choice.

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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by Readyinvestor » Mon Nov 20, 2017 5:32 am

Mel Lindauer wrote:
Sat Nov 18, 2017 12:20 pm
Readyinvestor wrote:
Sat Nov 18, 2017 7:03 am
Mel Lindauer wrote:
Tue Nov 14, 2017 4:03 pm
Lower costs at another provider can more than make up for the surrender fee if held for a long enough period of time. It's irrelevant if the surrender fee eats into the original investment or not.

Do the math. Compare what you're paying now vs what you'd be paying at a low-cost place like Vanguard. Then divide the annual savings into the surrender fee to get the payback period. It's a simple math problem; it's not rocket science.
Your math looks good. As you can see, the payback period is very short and from then on, you're putting that saved money in YOUR pocket rather than the insurance company's pocket.

One thing to consider is when your next anniversary date is, since the surrender fee normally goes down by 1% per year. So, if you're real close to an anniversary date, make your move after that date. Otherwise, I'd do it now and not look back.
Thank you for your help with this. I appreciate it. Vr RI

Readyinvestor
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Re: Annuity Exit Strategy Help Requested: Wife’s ROTH IRA – Allianz 222 Fixed Index Annuity – Stay or go? How?

Post by Readyinvestor » Tue Nov 21, 2017 5:38 am

[/quote]
it's up to you whether to include the annuity in your AA or not. but since it is going away it's a moot point...
this is why i don't include mine:
1) it's an insurance product not an investment.
2) i don't include income producing vehicles (like SS) in my AA.
it's a personal choice.
[/quote]

Jim, Thank you - Great answer. I appreciate it. Makes sense. Vr RI

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