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READER PERSONAL FINANCE QUESTION:
“Hi, Barbara. I hope you don’t mind me reaching out to you. When I left my job, I left $130,000 in a retirement account. I met with a financial advisor who suggested an annuity, but I am not sure that is the best bet. I know you can’t officially offer financial advice as an advisor, but what do you think of a variable annuity from Allianz?
I would like to convert it all to a Roth IRA but know we can’t take the tax hit in one year. I would appreciate any insight you can give. Thanks!”
You are right, I can’t “officially” offer advice, but I would be more than happy to give you my off the record opinion!
You are very smart to consider converting your retirement account to a Roth IRA. Roth IRA’s have several benefits, including tax fee withdrawals. This is particularly attractive if you believe, as I do, that tax rates in the future will be higher than they are today. Another advantage of the conversion is that you don’t have to convert the whole amount in one year. You can convert it bit by bit so as to minimize the tax hit in one year! The IRS.gov website gives details in Publication 590 concerning Individual Retirement Arrangements.
WHY DO FINANCIAL ADVISORS LOVE ANNUITIES?
Financial advisors “love” annuities because of the high commissions the anuity seller receives. That said, there are advantages to annuity insurance products. In exchange for a lump sum payment, an annuity offers you a lifetime inome stream. If you want to check out an annuity in order to get the financial security that an annuity offers, there are some which have lower fees annd commissions, but you need to research them online yourself.
Whenever you purchase any product from an investment advisor, understand how the seller is being compensated. That gives you a grasp of potential conflicts of interest. Typically, fee only financial planners, are usually (although not always) the most trustworthy since they aren’t dependent on selling you a product in order to get paid.
It’s very important to keep yourself educated about where your money is invested and the fees you are paying.
SUBMIT YOUR QUESTIONS AND I’LL BE HAPPY TO CONSIDER THEM FOR A FUTURE ARTICLE
What is your experience with financial advisors and/or annuities?
image credit; Lasse Christensen
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