Does anyone have an annuity?

[awakenedsoul]

I'm reading Ed Slott's book, Stay Rich for Life! Growoing and Protecting Your Money in Turbulent Times. He talks about his mother, and how she was very pleased with an annuity when was elderly. Her husband left her a Roth IRA, and she wanted to know that she would have a set amount of money per month for the rest of her life. (She was in her eighties.)

I think I remember Suze Orman saying that she hates annuities. For some reason, I feel a pull towards them. Just curious if any of you have them, and your experience. It sounds like the fees are high. I'm almost 50. I'm interested in protecting the money I have. Have never played the stock market. Bonds sounded safe, but now I'm not so sure. I don't have the money now, but I will in the future. I'm just reading all that I can. I'm single with no kids.

[miradoblackwarrior]

Hi, Awakened soul. What Suze Orman says about annuities is right. Annuities are sold to unsuspecting customers based on their need for set money for life. When my mother passed away, she had a small annuity, which had no tax protection. What I inherited from her was a ghost of its actual value, and it put me into another tax bracket. I daresay it wasn't worth the tax bill that year.

Annuities are sold to give people secure feelings about their money. Mostly, however, they are designed to fill someone else's pocket--certainly not yours. If you have a Roth IRA (not clear on your post), you can put in a one-year catch-up after a certain age. Check into it further, if you haven't already. I put mine together years ago, and have the maximum taken right off the top of my paycheck. That money is tax-defered, or tax-free, depending on what you get.

If you are still shopping around for stability in your money, can I suggest a CD ladder? Over, say, five years, put together 5 separate CD's that mature one per year. The 5 year idea is because most banks or credit unions only go as high as 5 years for the maximum interest. Nowadays, interest is miniscule, so have multiple "investments", whether conservative with CD ladder, Roth, or 401K products. Or all of the above.

Please avoid the annuity route. Do some more homework. The only money you are protecting is your own, from greedy insurance companies that want to lock you into falsehoods. Suze Orman is right about this one, although she is not my favorite financier.

By the way, I am a bit older than you, single, and childless. My money is fiercely guarded. For what it's worth, after my mother's debacle, I wouldn't touch an annuity with a ten foot pole!

Good luck!
Susan

[awakenedsoul]

Susan, Thanks so much for your post. I did do some more research. Suze Orman has a whole page on the Internet on annuities. She doesn't recommend them. Sorry to hear your story about what happened with your mom's annuity. That's a shame. I appreciate you telling me. I was attracted to the idea of the fixed rate, and having that income for life. I don't have a Roth IRA or 401 K. (I wsn't in the corportate world.) For now, my cash is in a savings account. I was thinking about CD's, too. I'm really thinking of ten years from now. I have a trust set up, with provisions for stocks. If I inherit stocks, I will probably just leave them alone and only spend the interest. I've been able to keep my expenses low, which seems like the main thing. It sounds like you are smart with your money.

[Songbird]

Definitely skip the annuity. I did a lot of research on them awhile back as we were thinking about getting one for our retirement years and what I read totally discouraged me. They really are a rip off!

[Dhiana]

Definitely stay away from the annuity.

Unfortunately the interest rate on CDs isn't much higher than a regular savings or checking account. Shop around for rates. A ladder may be a comfortable option for you. Read the fine print as to what exactly that CD is invested in. Some CDs can be in accounts that can lose money.

For a Roth IRA, one only needs to have earned income and you can open one yourself through a company such as Vanguard or at your bank/credit union.
Within this Roth IRA you are welcome to invest in stocks, bonds, CDs, etc.
Check into Index Funds, which usually have a smaller expense ratio and are invested in a little bit of everything instead of all your investments in one basket of stocks.

[jrb3]

You can create your own equivalent of an annuity in several different ways. Joe Dominguez and Vicki Robin discuss one (US Treasuries directly held to maturity) in "Your Money or Your Life", which is what spawned New Road Map Foundation (which hosts these forums). John Bogle(?), founder of Vanguard Mutual Funds, suggests using no/low-load broad-market index funds. Your own interests, skills, and time available can help you work out what yours might be.

[awakenedsoul]

Thanks for the replies. I just got an email from my dad, who has done very well in the stock market. He said, "Bonds and annuities are the worst long term investment you can make." He told me to read Barron's at the library and suggested DRIPS.
Songbird, I guess that's why I think I remember Suze saying she hates them on her show.
Dhiana, I know. I was thinking the same thing about the interest rate on CD's. I've been reading about Vanguard. Right now I don't have earned income. My set up is working for now. I'm just thinking ahead ten to twenty years.
Joseph, Thanks for the info. I read YMOYL back in 1990. I'll have to read it again. The way our government is spending money makes me cautious.