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Appropriate to roll over entire 401k to FIA?

ValeRosso

Guru
543
Just wanted to get some opinions on this. Have a prospect (husband and wife) who both are adamant they don't want any stock market risk. He is retired, she is retiring in a month.They lost $60k in her 401k a couple of years ago and still hasnt returned, and are very salty about that still, so they dont want any risk. They are kind of pushy because they want to “get out of the stock market” so

They have 60k cash savings outside of the 401, and their social security covers all their bills. They want income in a few months. Is it appropriate to roll over their full 401k into a FIA?
 
(Caveat, I am NOT an agent. I am a retiree on social security.)

Did they like the gains they got 3 and 4 years ago?
The stock market giveth and the stock market taketh away.

My 401K is quite small, however it went way up and then it rapidly lost about a third of its value. The only reason it did not loose everything it gained was because I made a small adjustment between stocks and bonds.

When I look at graphs of prices, it just looks to me like "events" (whatever those might have been), just scraped off 2-3 years of abnormally high valuations.

If FIA's are those things based on the stock market with caps on the earnings, it looks to me like if they do that, they risk not having any earnings on their money in some periods.

If they are both just starting retirement, depending on plans and spending, they may find $60K does not go as far as they think it might.

Based on very, very limited reading here, I don't think agents are supposed to advise clients to put all their money in an annuity.

And, if they want "NO Risk", wouldn't laddering CD's and MYGA's be a better approach? My thought would be looking at something like 12, 18, and 24 month CD's, 3, 5, and 7 year MYGA's. If a long term average return on an FIA would be 4-4.5 percent, couldn't they set something like that up more safely with the CD-MYGA laddering approach and leave their money more accessible?

(I have no clue about your commissions on the various products.)
 
Just wanted to get some opinions on this. Have a prospect (husband and wife) who both are adamant they don't want any stock market risk. He is retired, she is retiring in a month.They lost $60k in her 401k a couple of years ago and still hasnt returned, and are very salty about that still, so they dont want any risk. They are kind of pushy because they want to “get out of the stock market” so

They have 60k cash savings outside of the 401, and their social security covers all their bills. They want income in a few months. Is it appropriate to roll over their full 401k into a FIA?

You'll never get that through compliance with any decent company. 50% of assets is the most you'll normally see without exceptions, although some carriers (like Allianz) have more liberal rules.

Still, if they lost 60k, they probably have 300k+ in their account and I don't know of any carriers that would take that with only 60k in other assets.

You could probably move 200k and have them allocate the other 100k into non-annuity safe/liquid investments.

You won't get paid on that part but at least you'll get some of the business.

And, if they want "NO Risk", wouldn't laddering CD's and MYGA's be a better approach? My thought would be looking at something like 12, 18, and 24 month CD's, 3, 5, and 7 year MYGA's. If a long term average return on an FIA would be 4-4.5 percent, couldn't they set something like that up more safely with the CD-MYGA laddering approach and leave their money more accessible?

FIAs should outperform MYGAs over time and when people say "no risk" they normally mean not losing principal.

There are a ton of FIAs with short surrenders like MYGAs, liquidity riders, liquidity options, and lifetime income options.
 
(Caveat, I am NOT an agent. I am a retiree on social security.)

Did they like the gains they got 3 and 4 years ago?
The stock market giveth and the stock market taketh away.

My 401K is quite small, however it went way up and then it rapidly lost about a third of its value. The only reason it did not loose everything it gained was because I made a small adjustment between stocks and bonds.

When I look at graphs of prices, it just looks to me like "events" (whatever those might have been), just scraped off 2-3 years of abnormally high valuations.

If FIA's are those things based on the stock market with caps on the earnings, it looks to me like if they do that, they risk not having any earnings on their money in some periods.

If they are both just starting retirement, depending on plans and spending, they may find $60K does not go as far as they think it might.

Based on very, very limited reading here, I don't think agents are supposed to advise clients to put all their money in an annuity.

And, if they want "NO Risk", wouldn't laddering CD's and MYGA's be a better approach? My thought would be looking at something like 12, 18, and 24 month CD's, 3, 5, and 7 year MYGA's. If a long term average return on an FIA would be 4-4.5 percent, couldn't they set something like that up more safely with the CD-MYGA laddering approach and leave their money more accessible?

(I have no clue about your commissions on the various products.)

Thanks for the input. They do like the gains of the market, but absolutely do not want any losses. CDs would be a decent option, however two things: one, they’re in rural areas, and the only bank remotely close to them offer 3% CD rates, and two that Money would be tied up similar to an annuity, however the time is lower on a CD, and with an annuity they still would have regular access to the money up to 10% per year, if needed.

Also one more thing, they are technologically off grid (no internet, no computer) so having them do a CD ladder with a remote bank might be above their patience level. Just assuming.
 
You'll never get that through compliance with any decent company. 50% of assets is the most you'll normally see without exceptions, although some carriers (like Allianz) have more liberal rules.

Still, if they lost 60k, they probably have 300k+ in their account and I don't know of any carriers that would take that with only 60k in other assets.

You could probably move 200k and have them allocate the other 100k into non-annuity safe/liquid investments.

You won't get paid on that part but at least you'll get some of the business.



FIAs should outperform MYGAs over time and when people say "no risk" they normally mean not losing principal.

There are a ton of FIAs with short surrenders like MYGAs, liquidity riders, liquidity options, and lifetime income options.

Thanks for the comment. I believe they will have less than 50% of their total assets inside an annuity when its all said and done, but your reminder of this is appreciated. I guess if suitability does come back unhappy, I could adjust the principal to a lower amount if the client is ok with that. Either way I’m fine with any new business like you mentioned.
 
Do they have a cell phone? They can open an account with Schwab or Fidelity and buy CDs that way. CDs are available at 5% or better for maturities of 1, 3, 6, 9, 12, etc. As they mature they buy new ones.

I've been doing that since January. My CDs mature almost weekly now so I'm never very far from cash if I need it.

There are 1 month CDs at 5.150 and 3 month CDs at 5.450.
 
Thanks for the input. They do like the gains of the market, but absolutely do not want any losses. CDs would be a decent option, however two things: one, they’re in rural areas, and the only bank remotely close to them offer 3% CD rates, and two that Money would be tied up similar to an annuity, however the time is lower on a CD, and with an annuity they still would have regular access to the money up to 10% per year, if needed.

Also one more thing, they are technologically off grid (no internet, no computer) so having them do a CD ladder with a remote bank might be above their patience level. Just assuming.
Hey,
Thanks for the comments. That better explains your situation.

I'm in an urban environment, Have one credit union with a 13 month 5% CD and a second with a 12 month 5.25% cd; both having branches within a short driving distance of my house.
 
Do they have a cell phone? They can open an account with Schwab or Fidelity and buy CDs that way. CDs are available at 5% or better for maturities of 1, 3, 6, 9, 12, etc. As they mature they buy new ones.

I've been doing that since January. My CDs mature almost weekly now so I'm never very far from cash if I need it.

There are 1 month CDs at 5.150 and 3 month CDs at 5.450.

They do have a cell phone, and that’s a good idea. If you have CDs maturing every week...you have 52 different CDs? Or am I missing something?
 
Hey,
Thanks for the comments. That better explains your situation.

I'm in an urban environment, Have one credit union with a 13 month 5% CD and a second with a 12 month 5.25% cd; both having branches within a short driving distance of my house.

That’s great! I google mapped the address for these people, and the closest actual city is about an hour away. I couldn’t imagine being that far away from a city.
 

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