Allianz Fixed Annuity for IRA

Submitted by Edward Podoba on Thu, 2015-02-05 20:33

I’m 65 yrs old, still working and plan on working few more years. I read Mr. Slott’s book “The Retiremnet Savings Time Bomb and how to defuse it….” and have a question. I am planning on rolling over/investing my IRA into two Allianz fixed annuities; Alianz 222 and Allianz 360. Assuming, that I will not need this money for the next 10 years, when early withdrawal penalties go completely away, but will be able to withdraw 10% of funds per year penalty free, if needed, is this a good plan for my IRA? I plan to start converting these funds to Roth IRA gradually, perhaps after I stop working and will be in a lower tax bracket. My ultimate plan is to leave this money for my two children down the road.

Am I overlooking something or may be I’m not aware of something I should be?

I would appreciate an advise on this plan. Thank you,

Kind regards,
Edward

P.S. The math question below was rather difficult, damn elementary school!



Submitted by Alan - IRA critic on Fri, 2015-02-06 17:44

Annuities have major opportunity costs. Once you purchase an annuity, if either a better investment becomes available or you find that the fees are higher than you understood, you will usually pay major surrender fees to get out of the annuity. In addition, if something happens and you need the money to pay expenses, you will face the same fees to surrender the contracts. You will also have to take RMDs starting in 5 years, so you have to be sure that RMD distributions will not cost you anything more than the taxes due on them. Of course, if you feel you completely understand these annuities and are comfortable with them, instead of committing your entire IRA to them, you might purchase one and invest the rest in low cost index funds with the appropriate custodian. High costs erode your return by large amounts over a number of years. Of course, the IRA might not be doing as well as it could have where you have it now either, so it is impossible to know whether transferring it will improve your IRA return or reduce it.

Submitted by Edward Podoba on Fri, 2015-02-06 20:50

Thank you very much for your input. Speaking of low cost index funds, which one would you recommend?

Submitted by Alan - IRA critic on Fri, 2015-02-06 22:43

Vanguard and Fidelity have several, and Schwab has low fee ETFs that function generally in the same manner. These firms will assist in setting up a transfer of your current IRA to their firm and also provide assistance in suggesting what low cost index investments are appropriate. You could have a few as one, but with 3 you could have a domestic total market fund, an international fund and a total bond fund to get better diversification. The main decision is how much to have in stocks and how much in bonds. What you would need to tell them is to limit the choices to low cost index type funds, no managed funds.

Submitted by Edward Podoba on Mon, 2015-02-09 21:09

Thank you very much, I appreciate your advice. Regards,Edward

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