Conference nyoss1::market_investing

420.0. "Variable Retirement Annuity" by ICS::MANDEVILLE () Fri Mar 19 1993 11:55

    My husband and I have been approached by a representative from
    ALLmerica Financial.  He has suggested a Variable Retirement Annuity.
    These are based on 10 or so mutual funds.
    
    There are deferred tax advantages, one can withdraw 10% per year
    without penalty, there are severe (to me who doesn't like to lose any
    money) penalties for withdrawing the first 10 years.  It sounds good,
    with the exception of the fees which are over 2 percent.
    
    We are fully invested in SAVE, ESPP, IRA's, and are paying extra each
    month against the mortgage.  We are also putting funds in no-load
    mutual funds (20th Century Growth and Janus).  We have only one
    child, already college educated and married (all paid for thank God).
    We plan to retire in 10 years at ages 55 and 58 (at least not work
    here anymore).
    
    It bothers me to pay a load, but the tax advantage is the draw.  Also,
    they will give you financial advice (which we have yet to see, as we
    are meeting with this person next week).  If there really is a good
    financial planning piece to their services, it would certainly be
    cheaper than fee only financial planners, which we have looked into.
    I think fee only planners want folks with lots more money, and 
    charge a greater amount than I would want to pay.
    
    As you folks have been my education (along with a few of the books
    and periodicals you have recommended) in investing, I thought I'd ask
    for your help and advice.  What do you folks think of these Retirement
    Annuities?
    
    Thanks for all the help I know I'll get, and thanks for the education
    I've received here in the notes file.
    
    Elaine
    
    

I've been noticing a trend in annuities lately.  It seems as the public becomes
more educated about mutual funds, loads, hidden expenses, etc, more and more
companies are going no load or low load.  It seems seems that annuties are 
starting to go the same rout.  I use the example of the Scudder/Horizon annuties
offered by Scudder, Stevens, & Clark and Charter Insurance.  They are truely no
load.  Yes the internal expense structure is higher than the standard mutual fund,
but that is because the insurance company must be involved and get their cut.  
The Horizon plan has no sales load, no restriction on withdrawel (except those
imposed by the Government, ie. must withdraw interest first, taxable, and has the
same penalties for early withdrawal).  I have found that the expenses are no 
worse than some of the regular mutual funds out there (they are less than 2.5%).
You might shop around first when looking at annuties.  Make sure the insurance
company that is involved (remember there must be an underlying underwriter) is
highly rated by A.M. Best.  If you find the company has multiple restrictions on
withdrawals, complicated fee structures, high internal expenses, etc....move on
to the next one.  Anuities are currently getting a lot of attention due to the
threat of rising taxes, so I expect a flood of new offerings.  But inovative 
companies will offer products without the complications that we have seen in the
mutual fund area for so many years.

my two cents

Michael

    Look at note 417 and also look at an article in the Wall
    Street Journal 2/9 or 2/10.  It has an excellent article on
    variable annuities and what to look out for.
    
    Gim