Announcement

Collapse
No announcement yet.

412e(3) Plan

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • rag145
    replied
    No, I do not sell these for all of the above reasons.  More importantly, the commission would bias me in favor of my own self interest, not my client's interest.  I am a firm believer in being aware of confirmation bias.  That is, reviewing only information that confirms my view point.  I could read another Jack Bogle book, or study something that advocates an approach that I am not comfortable with.  Doing the latter from time to time is an important exercise.  If someone could cut a check for 100k, and get 60k after tax----versus getting 100k and putting it in an annuity for 30 years at 1 percent---with all of the disadvantages listed above---who winds up with more money?  Year after year the 1 percent guy has an extra 40k to invest, although granted at only 1 percent.

    Leave a comment:


  • jfoxcpacfp
    replied




    They are promoted as having the ability to save taxes in a major way in exchange for an annuity.  If you save 33 percent in taxes and get a 1 percent annuity, and it is legal, what particular issues do you have with it?  The annuity has a commission, and there are surrender fees, etc….and, it appears to be an opaque process.  I find that there are a limited amount of individuals that have experience with the product or understand it.  In general, I am against it (because it does not seem to be transparent and understandable), but I am intrigued by it as well.  Additionally, if the insurance company goes out of business, the “safe” annuity may not be very safe after all.
    Click to expand...


    Being intrigued has nothing to do with a sound financial decision. They are oversold and under-understood (as you pointed out) as a way to save taxes. I don't believe in saving taxes only for the sake of saving taxes, otherwise, I would tell my clients who wanted to save 33% to simply work less. There has to be an overall better reason than buying an annuity with all of the baggage that comes with it. As you also pointed out, surrender fees, commissions, and, as you didn't point out, lower long-term returns than you would be able to get in a well-diversified equity fund portfolio that is invested according to the dictates of a well thought-out financial plan.

    As a financial advisor, do you sell these?

    Leave a comment:


  • The White Coat Investor
    replied
    The complexity is a huge strike against it in my view.

    The fact that it is also pushed primarily by insurance agents is also a huge strike in my view.

    Could it work out okay for just the right person if structured well? Probably. Are you or I that person? Probably not.

    This sort of thing becomes popular out of an inordinate fear of lawsuits over your malpractice limit and an inordinate fear of just investing in a taxable account.

    Leave a comment:


  • rag145
    replied
    They are promoted as having the ability to save taxes in a major way in exchange for an annuity.  If you save 33 percent in taxes and get a 1 percent annuity, and it is legal, what particular issues do you have with it?  The annuity has a commission, and there are surrender fees, etc....and, it appears to be an opaque process.  I find that there are a limited amount of individuals that have experience with the product or understand it.  In general, I am against it (because it does not seem to be transparent and understandable), but I am intrigued by it as well.  Additionally, if the insurance company goes out of business, the "safe" annuity may not be very safe after all.

    Leave a comment:


  • jfoxcpacfp
    replied
    :x

    Leave a comment:


  • rag145
    started a topic 412e(3) Plan

    412e(3) Plan

    What does the White Coat Investor and the community think about 412e(3) plans?
Working...
X