Chamberlain Financial Planning and Wealth Management
Michael Chamberlain has been helping people to make better financial decisions to improve their lives since the 1980’s. Chamberlain Financial Planning was established in 2007 to assist people on a fee-only basis, which means that we do not sell investments or insurance, unlike 95% of other firms.
Michael's education includes both Bachelors and Doctorate degrees from the University of California, Berkeley. Accredited Investment Fiduciary course work was from The Center for Fiduciary Studies at the University of Pittsburgh and CFP® course work was from Boston University.
Michael lives in Santa Cruz with his life partner, Patty, but most of his family is in Sacramento. His daughter Cathi, her husband and three kids, his two brothers and Mom and Dad are all living there. In 2009, Michael opened a branch office in Sacramento so that he could visit with his family more frequently. His son Mitch lives in Austin Texas with his wife and two little girls.
Sailing is one of Michael's life passions. It is a great way to get in touch with nature and he is fortunate enough to have a sailboat at the Santa Cruz harbor.
Doctorate, UC Berkeley
Assets Under Management:
Good question. It is one that should be asked more often.
The old saying is that Annuities are sold not bought. The reason that they are often sold is due to the commissions that the salesman generate, which can be over 6%.
Keep in mind, there are different types of annuities such as a fixed, variable, and indexed annuities. Each have different selling points. Since you mentioned the purpose would be to pay for medical premiums, I am guessing that you are thinking of a fixed annuity.
I would not recommend a fixed annuity, which has a fixed pay out each month, quarter, or year to pay for insurance that will have rising premiums. Lets say that your health premium is $800 a month the first year, but next year is $1,000, and the following year is $1,000. If you do not have access to additional dollars, you will not be able to afford to pay the rising premiums.
Without more info, I can not be more specific, but in general, NO I would not covert $70,000 to an annuity.
Drum roll please! And the answer is... it depends!
If your 401(k) is from a large corporation, it may have low fees and really good investment options than if you had you been with a small company. The reason is that small business owners are more concerned with keeping the company going then to spend time on making the 401(k) great. Big companies have more resources and some 401(k) plans like at Apple are really good.
I do not know your age, what income you have, nor your expenses or your family situation, so giving investment advice specific to you cannot happen.
You say your Fidelity advisor is pushing you to roll over the 401(k). So, the all-important question is “will the advisor and Fidelity benefit from the rollover?” Are you paying Fidelity to manage your IRA? If the answer is yes, then when you roll the 401(k) into the IRA, the management fee will (in most cases) be higher. This could be a reason to not roll it over!
The next question would be to review the investment options in the 401(k) and compare them to what is in your IRA accounts. Some 401(k) plans have investment options outside of Fidelity. If you were to roll the 401(k) over to an IRA, the Fidelity advisor might suggest more Fidelity funds, which could be a conflict of interest since Fidelity would benefit from more Mutual Fund fees.
After understanding a clients situation, I often suggest that those retirees that have a 401(k) via Fidelity to roll it over to an IRA so that we can have improved investment options and with lower fees than what is in the 401(k).
My advice to you would be to ask more questions and to read the following articles.
9 Considerations Before Rolling Over Your 401(k)
Busting 5 Financial Myths
Having worked with many individuals in this situation, you may feel all things are overwhelming. Trust me in that it will seem better over time! Your question cannot be addressed in a few paragraphs and do your question justice.
“Securing My Financial Well-Being.” is an eBook that I have written for people specifically in your situation. You may download it for free. I never know who does so and it is posted as a public resource. https://chamberlainfp.com/resources/widows-and-widowers
There are many good responses to your question that have been posted here. You may want to hire a CFP "Fee-Only" advisor near you to provide specific advice to your situation.
Granted, I do not know anything about you other than you are 27 years old, so anything that I state here will be a generality, but here goes. It is as simple as 1, 2, 3!
- If you are looking for investments, than buy an investment, not an insurance policy.
- If you are looking for a retirement account, get that, not an insurance policy.
- If you are looking for life insurance, then consider that.
Do not consider a life insurance policy (IUL or any other) as an investment or a retirement account!
This is very simple. Answer these three questions
1-Do you like an instant 50% to 100% return on your investment? If so, be certain to contribute to your firms 401k.
When you say the your company has a 3% match it sounds like a safe harbor provision where the firm matches your contribution up to 3% of your salary. Depending on the terms of your firm's 401k Plan it could well be a $1 to $1 match (or possibly 50% match). This means that for every dollar you put in your account has $2. That is an 100% return. Where can you invest out side the 401K and get a 100% return?
2- Do you want to pay less income tax?
If so, contribute to the 401K. For every $1000 up defer you do not pay tax on the Money. You live in TX so there is no State income tax but you probably pay Federal income tax. Lets assume that you pay 15% fed tax. If you invest the $1000 in your 401k you have $1000 invested. If on the other hand you did not put the $1000 in the 401k and preferred to put money in your investment account, of that $1000 after you pay $150 of income tax you only have $850 to invest.
3- Do you prefer tax-free income or taxable income?
If your 401k plan offers a Roth option that too is better than a taxable account.
Since you did not state all the information that an advisor would ask you prior to giving you advice, do not take this response as advice in your situation.