Getting Started In Investing? Forum

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jotarokujo

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Re: Getting Started In Investing?

Post by jotarokujo » Thu Sep 16, 2021 10:59 am

Definitely Not North wrote:
Thu Sep 16, 2021 9:38 am
Anonymous User wrote:
Wed Sep 15, 2021 6:44 pm
I actually took some of the suggestions in this and other similar TLS threads to heart, and started looking into VOO. When I contacted someone at Fidelity about that, they recommended I take around half of what I was thinking about putting into VOO and instead put it into an annuity (the purpose being, tax-advantages down the road, as I don't need the money soon). The hands-off annuity they recommended still has a small percent-based fee (they called it a "mortality and expectation" fee, or something like that..). Sound like a reasonable cost for an annuity?

Do people around here go in for annuities? (As well as, or instead of, safe vanilla stock-based products like VOO?)
What else did the salesman say you need that he happens to sell?

I’d say nobody on here is buying annuities (lol), but this is also the forum where a shocking number of people think they’re smart having several hundred thousand dollars sitting in a bank account earning nothing.

I’d suggest putting 100% into VOO or equivalent (clicking the buttons yourself, not giving someone the opportunity to sell you dumb stuff) and never talking to a financial “advisor” again. This is all you need: https://www.bogleheads.org/wiki/Three-fund_portfolio. This stuff isn’t as hard as financial “advisors” want you to think it is.
no reason to go annuities. just 100% VT or split 60/40 VTI and VXUS. For mutual funds (401k) just go all in VTWAX if available

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Re: Getting Started In Investing?

Post by Anonymous User » Thu Sep 16, 2021 10:59 am

Definitely Not North wrote:
Thu Sep 16, 2021 9:38 am
Anonymous User wrote:
Wed Sep 15, 2021 6:44 pm
I actually took some of the suggestions in this and other similar TLS threads to heart, and started looking into VOO. When I contacted someone at Fidelity about that, they recommended I take around half of what I was thinking about putting into VOO and instead put it into an annuity (the purpose being, tax-advantages down the road, as I don't need the money soon). The hands-off annuity they recommended still has a small percent-based fee (they called it a "mortality and expectation" fee, or something like that..). Sound like a reasonable cost for an annuity?

Do people around here go in for annuities? (As well as, or instead of, safe vanilla stock-based products like VOO?)
What else did the salesman say you need that he happens to sell?

I’d say nobody on here is buying annuities (lol), but this is also the forum where a shocking number of people think they’re smart having several hundred thousand dollars sitting in a bank account earning nothing.

I’d suggest putting 100% into VOO or equivalent (clicking the buttons yourself, not giving someone the opportunity to sell you dumb stuff) and never talking to a financial “advisor” again. This is all you need: https://www.bogleheads.org/wiki/Three-fund_portfolio. This stuff isn’t as hard as financial “advisors” want you to think it is.

I mean look, this is a helpful reply despite the sarcasm. I'm an associate who only recently starting making serious money. I don't come from a family that has lots of wealth. And I didn't take anything finance/investment-related in school beyond basic econ. So I don't have the background to call out an advisor from Fidelity as saying something shady when he says (presumably, at least facially reasonable) that I should put half of the money into an annuity rather than all into VOO because the annuity has certain tax advantages way down the road. What do I know about annuities other than the very basics?!

If what he's saying is just salesmanship, I'd love to hear others confirm it as well! And of course i will read that link you included, thank you.

Hstrat

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Re: Getting Started In Investing?

Post by Hstrat » Thu Sep 16, 2021 11:10 am

Anonymous User wrote:
Thu Sep 16, 2021 10:59 am
Definitely Not North wrote:
Thu Sep 16, 2021 9:38 am
Anonymous User wrote:
Wed Sep 15, 2021 6:44 pm
I actually took some of the suggestions in this and other similar TLS threads to heart, and started looking into VOO. When I contacted someone at Fidelity about that, they recommended I take around half of what I was thinking about putting into VOO and instead put it into an annuity (the purpose being, tax-advantages down the road, as I don't need the money soon). The hands-off annuity they recommended still has a small percent-based fee (they called it a "mortality and expectation" fee, or something like that..). Sound like a reasonable cost for an annuity?

Do people around here go in for annuities? (As well as, or instead of, safe vanilla stock-based products like VOO?)
What else did the salesman say you need that he happens to sell?

I’d say nobody on here is buying annuities (lol), but this is also the forum where a shocking number of people think they’re smart having several hundred thousand dollars sitting in a bank account earning nothing.

I’d suggest putting 100% into VOO or equivalent (clicking the buttons yourself, not giving someone the opportunity to sell you dumb stuff) and never talking to a financial “advisor” again. This is all you need: https://www.bogleheads.org/wiki/Three-fund_portfolio. This stuff isn’t as hard as financial “advisors” want you to think it is.

I mean look, this is a helpful reply despite the sarcasm. I'm an associate who only recently starting making serious money. I don't come from a family that has lots of wealth. And I didn't take anything finance/investment-related in school beyond basic econ. So I don't have the background to call out an advisor from Fidelity as saying something shady when he says (presumably, at least facially reasonable) that I should put half of the money into an annuity rather than all into VOO because the annuity has certain tax advantages way down the road. What do I know about annuities other than the very basics?!

If what he's saying is just salesmanship, I'd love to hear others confirm it as well! And of course i will read that link you included, thank you.
I completely get where you're coming from, I've had the same challenges with trying to get a little more financially literate after a background that didn't really require me to know any of this stuff. There are a few finance blogs that cater to high earners that I'd suggest you check out: WhiteCoatInvestor (caters to doctors, but the advice is highly relevant to lawyers), BigLawInvestor (modeled on WCI and meant to fill in details for lawyers), and Mr Money Moustache (centered around achieving financial independence and early retirement).

In this case, White Coat Investor has two great articles about why you should stay away from annuities:

https://www.whitecoatinvestor.com/the-c ... annuities/

https://www.whitecoatinvestor.com/shoul ... ible-iras/
Last edited by Hstrat on Thu Sep 16, 2021 11:33 am, edited 1 time in total.

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nealric

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Joined: Fri Sep 25, 2009 9:53 am

Re: Getting Started In Investing?

Post by nealric » Thu Sep 16, 2021 11:18 am

Wanderingdrock wrote:
Thu Sep 16, 2021 10:00 am
Anonymous User wrote:
Wed Sep 15, 2021 6:44 pm
I actually took some of the suggestions in this and other similar TLS threads to heart, and started looking into VOO. When I contacted someone at Fidelity about that, they recommended I take around half of what I was thinking about putting into VOO and instead put it into an annuity (the purpose being, tax-advantages down the road, as I don't need the money soon). The hands-off annuity they recommended still has a small percent-based fee (they called it a "mortality and expectation" fee, or something like that..). Sound like a reasonable cost for an annuity?

Do people around here go in for annuities? (As well as, or instead of, safe vanilla stock-based products like VOO?)
I've read that annuities can very occasionally make sense in certain very specific situations, but I've never quite wrapped my head around what those situations would be and am fairly certain I'll never find myself in one. A good rule of thumb is that when someone tries to get you to buy an annuity, it's because they stand to make a commission on it. That's it. That's the rule of thumb. Run, do not walk, away from that person who is not fulfilling any kind of fiduciary duty to you.
There is some argument for doing a single premium immediate annuity (SPIA) upon retirement to help protect against sequence of return risk. Essentially, the biggest risk in retirement is for there to be a market crash immediately after you retire. Putting it in an annuity can reduce that risk.

There is also some argument for a deferred annuity as longevity insurance, but the current market for annuities is not particularly conducive to that strategy as the products expose you to inflation risk, high fees, or both.

The really scammy products are just active mutual funds in an annuity wrapper. They are often called "variable annuities" but go by various names. Those are just a way to layer annuity fees on top of mutual fund fees, while burying the fees in a complex product buyers don't understand.

Anonymous User
Posts: 432508
Joined: Tue Aug 11, 2009 9:32 am

Re: Getting Started In Investing?

Post by Anonymous User » Thu Sep 16, 2021 12:46 pm

Thank you all, this is interesting and helpful. The pitch to me for going into an annuity in addition to VOO was mainly due to the annuity's tax-minimizing advantages down the road, because I had told the person I didn't need this money any time soon (also something about diversification but that was a more vague and less convincing case the guy made). But it sounds like even if there are tax advantages, they are outweighed by these other considerations (although I think the fee for the annuity at Fidelity is pretty small). And yes, I recall something about the annuity being "variable."

Other posters mentioned VXUS and VTWAX. I'll look into those in comparison to VOO, but I might just go with whichever is simpler to buy/understand from the Fidelity website, on the theory they're similar enough for a small-time modest investor-novice. :D

I'll try to read the White Coat Investor links, thanks for those as well.

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The Lsat Airbender

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Re: Getting Started In Investing?

Post by The Lsat Airbender » Thu Sep 16, 2021 5:02 pm

nealric wrote:
Thu Sep 16, 2021 11:18 am
There is some argument for doing a single premium immediate annuity (SPIA) upon retirement to help protect against sequence of return risk. Essentially, the biggest risk in retirement is for there to be a market crash immediately after you retire. Putting it in an annuity can reduce that risk.

There is also some argument for a deferred annuity as longevity insurance, but the current market for annuities is not particularly conducive to that strategy as the products expose you to inflation risk, high fees, or both.

The really scammy products are just active mutual funds in an annuity wrapper. They are often called "variable annuities" but go by various names. Those are just a way to layer annuity fees on top of mutual fund fees, while burying the fees in a complex product buyers don't understand.
nealric is correct as usual about this subject. Almost nobody younger than 40 should even be thinking about annuities but they can be a useful tool for managing risk in the decades near retirement (basically a cash alternative).

I would add that joint annuities can be an attractive life-insurance alternative for someone who wants to assure their spouse of baseline "you'll never be homeless even if I die and you make terrible financial decisions" income.

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