coming back at you. Today I'm doing something a little bit different. Not so much a financial
tip, today's is actually more of a financial rant. There are a lot of things in our industry
that I get really worked up on and the following is a prime example.
I had a client that had left her job. She
had taken a new position and she had a simple IRA. Simple IRA is kind of like a baby 401K
for small business owners. My rant or the thing that just got me so worked up was that
the owners of the company had taken out this simple IRA with an insurance company.
Instead
of having traditional mutual funds, they had an annuity product. A lot of people have their
own feelings on annuities. I don't really want to go down that path, but here is one
instance where I absolutely despise annuities, especially in retirement accounts. She had
left her job.
She had been gone for almost three months, and she wanted to roll over
her simple IRA to her own IRA. We called the insurance company and wanted to find out if
there were any surrender charges because I. Just had this feeling of there being a surrender
charge. Sure enough, lo and behold there was.
She had to pay a 6% surrender to roll her
money out of her old retirement account into her own IRA. It's her money. It's the money
that she put aside, but to get access to it to roll it over she had to pay a surrender
because it was in this annuity product. To make it worse she had six years before she
could roll all her money penalty free.
That burns me to no end. That is why -I'm going to use it, the hate
word- I hate annuities inside retirement plans. I think it's just ridiculous that somebody
has to pay a surrender to get access to their own money. Now it's something that she couldn't
avoid because that was her retirement account and she was doing the right thing by saving
for retirement.
Unfortunately, she found a better position and left. Now to get access
to that money she has to pay a very sizeable, lump sum, surrender charge to get that money. The insurance company did come back with her
being able to do a 10% free withdrawal for that money, so we still have to do 10% each
year. We can do it, and we still haven't decided what were going to do, but nonetheless that
just burns me.
Just be conscious of that. I'm not saying
don't utilize it because it is still a retirement savings tool for you. If you have no other
options out there, I guess it's better than saving for nothing. But still it's my rant.
I do not like annuity products inside retirement plans, especially those that require a surrender
to get access to your funds.
This is Jeff Rose, Good Financial Cents with
a good financial rant. Be sure to check us at the blog, and if you've not checked us
out on Facebook yet, please check out our Facebook fan page. Give us the big thumbs
up. We'll see you around.
Take care. The opinions voiced in this material are for
general information only and are not intended to provide specific advice or recommendations
for any individual. To determine which investment(s) may be appropriate for you, consult your financial
advisor prior to investing..
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