Annuity Investment - What Options are There?

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ZeeOSix

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So I want to invest a monthly annuity - ie, auto deposit money every month in to the investment.

I want to go long term to build a secondary nest egg with not a lot of risk, and with low fees if managed. It also has to be able to be easily liquified if I need the cash down the road.

What would you suggest for investment options? What kind of return percentage would one expect these days in something lower on the risk scale?
 
Dividends are your friend. Ten good yielding and boring stocks is what you need. Stay away from annuities.
 
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ZeeOSix, I agree with the prior posters WRT annuities. There are much better investment alternatives. If you are bound and determined to buy an annuity, you should at least explore charitable annuities for their tax advantages.
 
Boring yet good paying dividend stocks is the way to go.
Stay away from annuities.


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I agree with the above. Avoid annuities.

Open a brokerage account at Vanguard and set up regular deposits into the VTSAX fund. If you don't have an IRA that you're contributing to, this can be done as a Roth IRA; the principal is easily accessible.

VTSAX: maintenance fees of 0.05%.
 
Watch out for trading fees if you go with the investments. If it's $10 per trade, you will spend $120 per year with monthly investments.

Also, in the stock market you will have the risk of losing value when the stock price goes down. Boring companies like utilities or monopolies may retain value better during the downturns.

The lowest risk are investment will be US Treasury Bonds. You can buy short term ones directly from the treasury to have the liquidity you desire. But the returns are very low due to current government policy.

There are options there and a good decision can be made based on your risk tolerance.

One thing is clear, though. stay away from annuities.
 
A few questions:

How old are you?

Why such an aversion to risk?

Low risk investments are returning very low returns these days with interest rates bottomed out.

How well can you handle volatility? Do you want an investment that slowly goes up, if it goes up at all or can you handle an investment that goes up 1% for 4 days in a row and then goes down 3% on the fifth day?
 
Originally Posted By: Bandito440
I agree with the above. Avoid annuities.

Open a brokerage account at Vanguard and set up regular deposits into the VTSAX fund. If you don't have an IRA that you're contributing to, this can be done as a Roth IRA; the principal is easily accessible.

VTSAX: maintenance fees of 0.05%.

Sorry, I was sleepy when I posted this and hadn't considered your aversion to risk. Short term bonds offer lower risk than equities, but also much less reward. Stick with Vanguard though; no fees for buying their funds, and the annual maintenance costs are lowest in the industry.

VSCSX for short term corporate bonds. This fund won't be terribly voliaile, while providing regular returns that you can reinvest.

It would help some to know your age now, and how long before you'll need the money.
 
Too many questions for the OP and not enough info.

We can all agree on NO to annuities, though!

Ask/search at bogleheads.org, for best guidance.
Perhaps something like Vanguard's Wellington or Wellesley for a single, balanced fund. In a Roth, so you could access the contributions without penalty in an emergency.

Low risk means very low returns in this environment. So adjust your expectations. Anyone who tries to sell you high returns without risk is lying and do not do any business with them.
 
This investment I'm looking for would not be dipped into until much later when I might really need the money - talking 15~20 years down the line. So I'm looking to dump a regular monthly payment into the investment to build a secondary nest egg.

From what I've read so far from replies here, it sounds like a good brokerage account or Roth IRA might be the way to go. Finding something with tax free gains would be a plus also. The investment being liquid with no or very small penalty is a main factor too, just in case I need to get the money out for some kind of emergency if needed.

Thanks for the suggestions so far. I'm not a very experienced investor, so anyone posting here with some good experience is very much appreciated.
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Tax free gains and easily liquid are not going to happen. If retirement is in 15-20 years then an IRA is the way to go. You'll pay a penalty if you need the money for an emergency but it's there if you need it. And there for your retirement.

20 years is a decently long horizon and most "experts" would advise stocks in companies you know and like.

I have brokerage accounts with a few of the Internet brokers. They all do the same thing but their software interfaces are different.

In 20 years you might be kicking yourself for not accumulating oil positions.
 
Perfect, you're in the same time frame as me; 16-17 years.

The gains in a Roth IRA are tax-exempt, and you can withdraw your principal without penalty.

You can invest Roth IRA money anywhere you please. Start by opening an account at Vanguard and get it funded. The maximum you can deposit this year is $5,500. They have a bunch of their own funds which won't cost you anything to buy into. So, stick with index funds. Over the long term, paying a manager to pick stocks doesn't benefit you. If you read some of John Bogle's stuff, it'll point you in the right direction.

You've got a long time before you need that money, and you can afford some risk for greater rewards. Invest in equities, make regular deposits, and you'll have a good sum of money when you retire. So, equities for now, and more bonds as you get closer to retirement. You can do that yourself or invest in a target fund that'll become more conservative as you approach retirement. For now, their total stock market fund is the way to go. The investor share version has a minimum investment of $3,000. You can convert that to admiral shares when your deposit hits $10,000 and benefit from even lower fees.

I set up a regular allotment with my payroll provider; $211.53 gets deposited in my Roth account from each paycheck, which will hit that $5,500 mark over 26 paychecks.
 
Originally Posted By: Bandito440
Perfect, you're in the same time frame as me; 16-17 years.

The gains in a Roth IRA are tax-exempt, and you can withdraw your principal without penalty.

You can invest Roth IRA money anywhere you please. Start by opening an account at Vanguard and get it funded. The maximum you can deposit this year is $5,500. They have a bunch of their own funds which won't cost you anything to buy into. So, stick with index funds. Over the long term, paying a manager to pick stocks doesn't benefit you. If you read some of John Bogle's stuff, it'll point you in the right direction.


A Roth IRA sounds about like something I'm looking for with this supplemental nest egg investment.

What kind of of interest return rate do IRAs typically yield?
 
Genworth Life. Relinquish $20,000 for 20 years and get $10,000 interest at the end of 20 years.

In the meantime, they own your money and you can't touch it.
 
The Roth IRA is just the tax shelter account. Your returns depend on where you invest the money. After your account is funded, you'll decide which fund to put your money into. Over the long term, equities (stocks) have averaged 8% or so. Bonds have averaged 2% - 6%.

Have a look at Vanguard's list of mutual funds. Notice the annualized returns over 10 years, and don't worry about how things have done over shorter time periods. There will be good years and bad years before you retire. The key is to not freak out, keep your money where it is, and continue making regular deposits.
 
Generally, the idea is to be in investments that offer greater reward now, and move to safer things as you get closer to retirement.

Annualized 10 year returns:

VTSAX Total Stock Market - 8.33%
VBTLX Total Bond Market - 4.40%
VSBSX Short Term Bond - 3.31%

My money will be in VTSAX for the next 10 years, and then I'll slowly be putting it into safer bonds as I get closer to retirement.
 
Like everything involving investing..."it all depends". I think most would agree that for the majority of people, annuities are not the best answer especially if you need access to your money. Typically, you take a significant hit on the upside to protect your downside independent of surrender penalties and other restrictions. I wouldn't want that as a primary or secondary pot of money.

If you have a significant time horizon until retirement and are potentially looking at 30 years IN retirement, then you need to think about your return and not an insurance company vehicle that will protect your downside. Although there are variations on the theme with annuity products, I go by the adage that insurance products are not investments.

Even in retirement, you'll likely be better served over time by a sufficient amount of equities and dividend paying stocks versus an annuity product that is likely to be inherently complex and limiting. My 89 year old mom has kept about 40% in equities ( through mutual funds ) all through retirement and it's served her well. Don't be too conservative with your investments and/or investment vehicles if your time line is over a decade.
 
Open a Roth IRA at Vanguard. Set auto deposit/investments up.

Invest in Vanguard Target Retirement 2030 Fund (VTHRX), and don't touch it for a couple decades.



Merkava - are you serious? That's a 2% annual return. Horrible, horrible investment. Likely to not even keep up with inflation, so you're actually losing money. A good example of why to stay away from INSURANCE companies and salesmen when it comes to INVESTING!
 
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