Lux Investing
funds versus annuity again?
Im used to my dad getting 8-10% on some funds and 12-18% on other funds for the last few years. With me inheriting this (a trust), I am figuring on keep the same methods. Though he was 90+ and I am mid 40's. It seems to me, that whether old or young, that funds are a good way to go. I figure on retaining some of it as annuities or cd (at most 25%, like dads). I dont plan to do stocks at all except for good yield dividend stocks that I would hold for long term. (&/or also Drip investing)> I neglected detail. This is all inside a trust account and up to 1/3 will be used to pay bills (income) while majority of inheritance will be left alone. Based on my dads trust performance I cant see why other senior citizens would opt for annuities when dad was averaging a around 12-15% consistantly. His min was around 8% on a couple of funds but as high as 18% on others. Eventually about 10% of trust will actually be in a IRA (traditional & ROTH) though not neccessarily in a trust. Why settle for 3-6% on a cd or annuity (my mom). I guess I need to understand more. My parent was making nearly $57000 a year on his funds because it was paying for his nursing home/assisted care out of profits made.
Public Comments
- And your question is?
- The main advantage of annuites is the tax deferment. There is an insurance company at the other end of the annuity taking it cut and there is a mutual fund in which the annuities are invested also taking its cut. In general you can obtain much of the deferment by investing in a decent selection of index funds. Mutual funds unfortunately do not in many cases offer tax deferment because of the requirement of having to distribute realized capital gains. Index funds should not in general be distributing too many capital gains but they will be distributing earned dividends.
- There are other advantages of annuities. The most obvious one is the security. No one makes 12-18% without a decent level of risk involved. If the market tanks, you can lose a lot of the principal. Therfore, annuities are on the bottom of the financial pyramid, where you need a solid base. Aside from that, for older people, it is nice to know that the money in annuities will be outside of probate, and easy for your heirs to access. If you have a sizable amount of money, it is worthwhile to consider placing a SMALL PORTION of it in an annuity. 3-5% will look very nice at some point in the future. No one makes high returns every single year. If you would like to discuss this further, you can email me at smelamed@thecolumbiagroup.net Sam
