Financial Plan, Inc.
James (Jamie) Twining is the founder of Financial Plan, Inc., and a CERTIFIED FINANCIAL PLANNER™ practitioner who works with an exclusive high net worth client base. Jamie has a niche advising BP Cherry Point refinery employees.
A graduate of the University of Southern California and a devoted husband and father, Jamie enjoys spending time with his family, leading the choir at Sacred Heart Church and outdoor sports including mountain biking, scuba diving, and an annual surfing trip to Mexico.
His favorite pastime on a rainy winter’s night is to sit down with his son Gabriel, open a bottle of fine Pinot Noir and play a game of chess.
The factors that influence an annuitization rate are 1) your age and 2) projected interest rates. So as you expected, in a low interest environment, payouts are lower. Interestingly, annuity issuers do not take into account the health of the annuitant; rather your life expectancy is assumed to be average. This can create an opportunity if you have good reason to believe, based upon your own health and family history, that you are likely to live well beyond average life expectancy.
That said, annuitization is not usually a good option in my professional opinion. Life insurance companies must be compensated for their overhead and profits. The implicit costs of these annuities is generally very high. For long term investments that are designed to produce gains and income over a lifetime, you would be better served to eliminate the third party (the life insurance company) and invest in a diversified portfolio consisting of collective securities such as mutual funds and ETFs. Any degree of risk and expected return can be achieved through the balance between equity securities (stocks) and fixed income securities (bonds).
Caveat: If you surrender your annuity, you will required to pay ordinary income tax on the internal buildup. If that is a large factor for you, you might cosider a tax free 1035 exchange to a more reasonably priced annuity, such as the offerings from Vanguard and Jefferson National. Also be aware that your annuity may carry a surrender charge. If so, it may be in your best interest to wait until that surrender charge dissappears before surrendering it.
Please get some objective advice, not a sales pitch from a Fidelity Annuity salesman.
Yours for success
Unless you are trying to make the Forbes Wealthiest Couples list, your retirement at age 60 is very likley to work out. However, general assurances like this are indadequate for such a critical financial decision. Nothing can replace the advice of a competent and experienced financial advisor who has the ability and tools to crunch the numbers.
Questions to ask of an advisor are included in this checklist: http://financialplaninc.com/advisor-selection-checklist/#.WfNpKGhSx9M
Your question implies that a good advisor can select and time the purchase and sale of investments in such a way to always result in rising account values. Let me be the first to tell you that no advisor can do this. No one can predict the future price of any security or market. Investment advice is one area of advice within a complete financial plan; other areas include but are not limited to Cash and Liability management, Insurance evaluations, Estate Planning, and Income Tax Strategies. Within the area of investment advice, the most valuable advice I give is in a bear market, when clients desperately want to sell low.
The model you are describing would result in the financial advisor going out of business in a bear market, precisely when the advice is most needed.
For more insight into the inability to choose investment "winners", research the Efficient Market Hypothesis.
I am going to be more blunt than the other advisors. The advice you are describing is the worst advice I have seen in a long time. The Insurance Agent who is making this recommendation is either a rip-off artist or woefully ignorant. My advice is to completely terminate any financial relationship and instead retain the services of a fee-only CFP.
First, determine whether your advisor is a securities salesperson or a fee-only advisor. Here are some clues that can help you: If your advisor has the title "registered representative", or if you see the phrase "securities offerred through..." then your advisor is really a salesman. A salesman is not qualified or paid to give advice. It will be difficult to determine what you are paying, because the brokerage industry is quite experienced at hiding compensation numbers. Regardless of what you are paying to a salesman, the value is questionable, because the true cost of buying and selling investments is near $0, and the "advice" is typically given as a tool to steer you into the investments being sold.
If instead, you see the words "fee only", or NAPFA member, then you have a fee-only advisor. This advisor is a fiduciary, and is qualified and paid to give advice. A fee only advisor is typically transparent with fees, and it should be easy to figure out how much you are paying. There are a few different ways that advisors charge, but far and away the most common is as a percentage of fees under the management of the advisor. Typically, a fee-only advisor charges in the range of 1% for the first million dollars, and lesser percentages for amounts over that. This fee should buy you more than investment management. It should include advice on your entire financial life. The advisor should oraanize your finances through financial statements, projections, and written action plans. The advisor should also coordinate a team of professionals that advise you in the areas of lending, insurance, income taxes, and estate planning.
You should see the fees being deducted from the money market portion of your accounts on a monthly or quarterly basis. To find a fee-only advisor's fee schedule , evaluate the firm's ADV form, which can be found at https://www.adviserinfo.sec.gov.