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Question for the Money Doctors

Question submitted on Sep 10, 2018.

Question

I am an 80 y/o female & am having trust problems with my financial adviser. He wants to keep me in an IRA annuity from which I have not taken any $$ from as yet & will need to do it soon or cash it in & reinvest. What to do??

Answer

Financial advisors offer a variety of services.  The more valuable advisor is the traditional, fee-based financial advisor who meets with the client to create a plan, monitors and discusses results, provides future strategies and can provide a variety of comprehensive services and advice.  More than that, a fiduciary advisor, who works for you and your best interest, is most valued, especially when they have significant experience, expertise and the appropriate credentials for the advice being provided.  The engagement of the client at this level facilitates trust and a longer term relationship built on care, respect and what is in your best financial interest.  It is important to be able to be open and honest with the person you hire.  You should request clarification, as in this instance when you question why a new investment recommendation is being  made, when you perceive that financial objectives may not seem to be met or you don’t understand the recommendation.  If you are unable to meet and discuss these things to your satisfaction, you may want to consider hiring a new advisor.    Visit www.findacpapfs.org to find a specialist near you.

In regards to your current IRA annuity, the type of annuity will often dictate how it is invested and when that investment can be utilized for reinvestment.  Consider the type of annuity that you currently have and determine whether or not it is serving you the way that you need it to.  Some products offered are not always for the client’s best interest but at times may be recommended to generate commission for the salesperson, though fee-based annuities are becoming more common in the marketplace.  You should be able to understand the investment vehicle that your assets are in and be able to evaluate how it fits in to your overall plan, with your advisor’s guidance.

In terms of Required Minimum Distributions (RMDs) since you are over age 70-1/2, you will want to evaluate your cash flow needs along with your long term strategy.  Annuities are investment vehicles that are usually contracted with an insurance company which accumulate earnings on a tax-deferred basis.  They, like IRAs, are tax deferred.  Although they can be perceived as being generally less risky, they can often yield lower returns than other investment solutions, are more likely to generate higher fees, and are usually less flexible when you need cash.  Working with a fiduciary advisor to determine when an appropriate time to begin or continue these distributions and in what type of investment vehicle, will prove to be most helpful to you. 

This site is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any security which may be referenced herein.  We suggest that you consult with your financial or tax advisor with regard to your individual situation.


For additional information visit http://www.360financialliteracy.org/

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