Rowan Financial LLC
Dave Rowan, MBA, CFP® is the founder of Rowan Financial, LLC. His mission is to enable his clients to achieve a future that is even brighter than their past and present.
Dave primarily attracts clients who are contemplating or experiencing a career transition. This includes moving from one employer to another while remaining in the same field, pursuing an entirely new profession, starting up a small business or embarking upon an encore career. Dave provides his clients with the short-term guidance necessary to successfully navigate these often stressful transitions with more confidence and financial security than they had ever imagined was possible.
Dave transforms the lives of professionals and entrepreneurs across the country with his expertise through his free online newsletter and blog. Each issue contains high value content that enables readers to make the most of their career transitions, not only from a professional development standpoint, but also in terms of their financial and personal goals.
Dave is a Certified Financial Planner® and is also a member of the Financial Planning Association® (FPA®). His background also includes a BS degree in Chemical Engineering from Penn State and an MBA from Lehigh University.
Dave is a sought after expert in the financial news media. He has been featured in various online publications including US News & World Report, NASDAQ.com, The LA Times, Yahoo! Finance, Investopedia, and The Christian Science Monitor.
Dave grew up in the Lehigh Valley of Pennsylvania and has lived in the area for most of his life. He currently resides in Bethlehem with his wife Stacy and their two daughters. He loves walking and hiking in nature, football, lacrosse, yoga, reading, writing, shopping at local farmers’ markets, eating healthy food, an occasional battle on Clash of Clans, and bringing positive energy to his work and his relationships with family and friends.
BS, Chemical Engineering, The Pennsylvania State University
MBA, Management of Technology, Lehigh University
Dave Rowan | Rowan Financial
You are asking all the right questions now that you are out of the surrender charge period for this annuity I'd need to look at the annuity as well as speak with you about the remainder of your personal finances and goals to offer specific advice.
However, here's some general advice for people in similar circumstances:
Your instincts are good to be questioning the value here. High fees coupled with mediocre investment performance often make annuities a bad deal. For a more detailed explanation of this, you can check out my perspective on annuities by visiting the attached link:
With that said, we're in somewhat of a "spilled milk" situation here because you've endured the bad part of owning an annuity and now are entering the good phase, which is starting the guaranteed cash withdrawals. By my math, a $1,900 a year withdrawal on the current cash value of $32,000 is a decent 5.9% guaranteed return which is really pretty good in today's ultra-low interest rate environment.
For now I'd hang onto the annuity but think about unloading it in the future if:
1.) We have a MAJOR stock market correction of 40% or more and you can buy into stocks at a significant discount versus current levels.
2.) Interest rates significantly rise and better guaranteed options present themselves.
Good luck with this decision and I wish you the very best in your retirement!
With Kind Regards,
All of us as investors wish we could invest money for a quick and sizable return within a 1-3 day time period. Unfortunately, these kinds of guaranteed returns are not the nature of financial markets.
In fact, stocks and stock markets can and do lose money, sometimes over a multi-year period. You can access the article I wrote below which shows that for a simple portfolio of 60%/40% stocks and bonds, investors needed to wait a full seven years to experience positive returns in some (rare) cases:
And for stocks alone, there have been ten year periods that have been essentially flat.
Bottom line - if you are looking for guaranteed returns in a very short time frame, your options are CD's or annuities. However, with patience and a long time frame (7 years or more) you can unlock the superior long-term returns that stocks and the stock market have to offer.
Good luck with making this investment decision!
With Kind Regards,
Congratulations on being so well prepared for retirement!
To me, you have positioned yourself well to have wonderful options available at this life stage. I am glad to hear that your wife loves her job, which I'm assuming means that she would plan to continue working for the foreseeable future. A first consideration for you is similar - do you love your job? If you do and find it deeply fulfilling, then there is no reason to stop. However, since you're asking this question, I'm guessing you don't love it.
If that's the case, then I'd recommend figuring out what you plan to do at this life stage because 45 is awfully early to retire. Some ideas:
- Take a career pause to spend time with your 10 year old for the next 8 years, then figure out what you want to do.
- Scale back and find something part time (even if it's not an ideal job) to have more time with your son.
- Read the following book to discover your Unique Ability -
Your Unique Ability is defined as a short list of tasks that you do better than almost anyone else and love so much that you'd do them for free all day long. Find work that allows you to focus upon your Unique Ability, even if it represents a pay cut versus what you're doing currently.
On the financial side of things, you can do a quick and dirty check on your retirement readiness by calculating your Retirement Account Multiple or RAM. Check out the following article to learn how:
If you get a RAM of greater than 7, (which I'm guessing you will) you can seriously consider pursuing alternate work that you find more fulfilling. If you are looking for a more detailed Retirement Plan for more certainty on your future finances, consider reaching out to an advisor:
Good luck with this important decision!
With Kind Regards,
You've done a good job providing information to answer the question; however, would probably need a little more info to offer you the best perspective. Specifically would need to know 1.) What is your time horizon with the money? 2.) Are you willing to risk some short-term losses to maximize your chances of better long-term gains? 3.) What does your overall financial situation look like and what tax bracket are you in now versus where do we project you'll be in retirement?
Regardless of the answers to these questions, I'd recommend that you:
1.) Make sure your Emergency Fund is fully funded. Park 6 months of living expenses there if you are the only wage earner in your household. If there is another significant wage earner in the household, you can consider having an Emergency Fund with 3-4 months of expenses.
2.) Fund an HSA. This is a great means to manage your tax bill.
3.) Open and fund a Roth IRA if you're eligible - tax free growth after tax contributions is a great thing.
Regarding the choice as to whether or not to max out your 401(k) plan versus to invest this money in an after tax account - this is a gray area. Let's walk through some IF/THENS.
1.) IF you've been diligently saving for retirement and already have a large balance in your 401(k), THEN it may make sense for you to invest this money in an after-tax account. Sometimes when people have all of their retirement savings parked in pre-tax accounts, they end up in a higher tax bracket than when they were working and would have been better served with some retirement savings in after-tax dollars.
2.) IF you're just getting started in your 401(k), THEN consider maxing this out and using some of the money you inherited to cover living expenses. You're probably better off in this instance taking full advantage of as much pre-tax investing as you can.
Finally, regarding time frame. As you know, investments can and do lose money. If your time frame is less than 5 years and you do not want to risk any principal, then you're probably better off in CD's or savings accounts. However, if your time frame is greater than 5-7 years, then consider investing in a low cost, well diversified portfolio of stock, bond, and hard asset ETFs.
Good luck with this decision!
With Kind Regards,
I'd need to learn more about you and your specific circumstances to know for sure, however, my general recommendation would be not to do this for 3 potential reasons: 1. Avoid getting bumped into a higher tax bracket, which could happen if you take out a large sum to pay off your mortgage. 2. Avoid having to pay higher Medicare premiums if your taxable income exceeds certain thresholds. 3. Keep tax write-offs associated with mortgage interest.
Also, your investments seem very conservative in your 401(k). This may make it difficult to generate the kind of returns that will keep pace with inflation over the long term and fully fund your retirement. Check out the attached article for some perspective on how long-term returns have fared from 1928-2015 as you consider how to invest your 401(k) plan:
With Kind Regards,