A variable annuity IRA at age 28?? Is this normal?
A year ago I didn’t know anything about investing and I lost my job so I decided to do a 401K rollover. Not knowing too much and not being told everything my life insurance agent/friend put my money in variable annuity IRA at age 28. It was a front end design and I can take out my money with out a surrender fee. What’s your take on all of this? Should I be angry? Any info would be greatly appreciated. I want to take my money to Vanguard.
Having read the other responses to your question, I felt compelled to answer, as well. First, a variable annuity (VA) can be conservative, aggressive, or anywhere in between, depending on how you allocate your assets among the various investment choices, called sub-accounts. It’s simply a “marriage” of an insurance company and mutual funds.
Second, the “don’t put a tax-deferred investment in a tax-deferred account” argument is not only wrong, but it’s preposterous. I’ve heard it for years. The media likes to latch on to that one. While an IRA is already tax-deferred, you’re not paying extra for the tax-deferred status of an annuity.
But, you are paying for some features and benefits that you may not need or want. VAs usually have a guaranteed death benefit – which at 28 means little to you, I suspect – and often times a living income benefit at some future point in time. These perks tend to be expensive, adding up to 1% to the other VA costs. All in, mortality costs, fund operating costs, and added benefits can amount to 3% a year. Find out what the costs and benefits are, and then decide if they provide value to your overall financial well-being.
Hope that helps.
Disclaimer. The information in this response is for general purposes only, and shall not be construed as specific tax, legal, or investment advice for any individual. The questioner is urged to contact their own professional advisers before implementing any tax or investment strategy.
oXYGen Financial – Breathe Easier® About Your Financial Future – Atlanta Georgia
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