jackson freedom flex DB annunity


B

bj

Our advisor has suggested putting our ira into a Jackson freedom flex db
annunity. We have only one ira as I was a homemaker. The advisor is telling
us that there is a guaranteed death benefit of whatever amount we put into it
as long as there is money remaing. My husband will start rmd's next year. Is
this a good idea?
Thank you

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D

David S Meyers CFP

Our advisor has suggested putting our ira into a Jackson freedom flex db
annunity. We have only one ira as I was a homemaker. The advisor is telling
us that there is a guaranteed death benefit of whatever amount we put into it
as long as there is money remaing. My husband will start rmd's next year. Is
this a good idea?
Thank you
Why would you put IRA money into a variable annuity? It's *already*
tax-deferred.

The only answer is: because of the riders, ability to annuitize (which
almost nobody
ever does), and maybe some guaranteed (annuitized) minimum income benefit.

Do you need any of those things?

The death benefit one is very questionable. You are paying for insurance which
guarantees that if you die, the heirs will get out at least as much as you paid
in. Over anything other than a fairly short period of time, assuming a
moderately
conservative portfolio, that's expensive insurance for very little
likely payout
since over time, the portfolio should be going up. And it'll go up a lot more
and faster if you're not paying a lot for various unnecessary riders
along the way.

How important is that death benefit to you?

Meanwhile, what are all the expenses for the annuity, the insurance wrapper,
the death benefit rider, the sub-account management fees? How long is the
surrender period?

I can think of very very few cases where such an annuity makes sense, and
that goes at least double or triple for such an annuity in an IRA.

It's possible that it's exactly right for you. I don't know nearly enough
to guess. But if you're asking here, you likely haven't been given enough
information, I think, to make a fully informed decision, nor have you been
presented with reasonable alternatives.

(At a glance, I found information about a Jackson annuity which sounds like
it may be the one you're looking at. The basic annuity wrapper, including
the death benefit, costs 1.3%. The sub-account management fees range from
0.57% to 2.23%. And if you pay an advisor to manage the sub-accounts (by
that I mean reviewing, rebalancing, etc. the sub-account portfolio), you
may add as much as another percent or two to this mix!. Nevertheless, the
minimum in expenses is on the order of 2%/yr. If you add in a guaranteed
minimum withdrawal rider, it could add another 1.5% to it. Those fees can,
therefore, range from about 2%/yr to as much as 4% or more. By comparison,
a low-cost conservatively managed balanced index-fund based portfolio might
cost you as little as 0.2%/yr or less. So you're starting in the hole,
right from
the get-go, by around 2% or more. That's a *huge* drag to overcome. And
there's a multi-year period during which a surrender fee applies in order
to make sure that if you buy this, you keep paying those fees a good long
while.)

But, as I said, it is possible that it makes sense. I'm certainly not
advising you one way or the other here. Just tossing out some numbers.



--
David S. Meyers, CFP®
http://www.MeyersMoney.com
disclaimer: discussions in misc.invest.financial-plan are for
educational purposes only and should not be construed as financial
advice. For personal financial advice, please consult directly with a
professional.
 

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