Financial advisors needed-Retiring, what to do with my lump sum in this economy?

[BC]

I am only 55, but will be retiring after 36 years with my company. I receive a lump sum pension plus my 401K. I have talked with several financial advisors, but like parts of all the options I have been given, but not everything about any one plan. As I am very conservative and with the current economy, I am leaning towards a single premium deferred annuity that would pay me monthly. The best interest rate is for 7 years, which ties my money up that long, but also would take me to Social Security age. Some of the post I have read states when you die it is over, but my agent is telling me my beneficiary will receive the same lump sum I would upon my death. In Today's market, if you were getting ready to retire, what would you do?

 

[golfgal]

There are many ways to set up an annuity so yes, you can have a beneficiary option or it could be all gone when you die. If you select the beneficiary option your monthly pay out is less. We have one annuity in our plan that is part fixed, part variable.

We put a lump sum payment into the plan and it is guaranteed not to go backwards (meaning our original amount is safe). 80% is in the fixed rate for 5 years (I think it is 5, might be 7) and 20% is in the variable. The rate of return on the fixed will grow to the original amount after the 5 years and the 20% will do whatever is going on in the market. We put it in when the index was at about 7000 so hopefully we will see a nice return on that. The
biggest concern with an annuity is to make sure it is will a STRONG company. Also, our annuity has a death benefit equal to the high point of the account value, plus the annuity payout.

The biggest problem with putting it all into a 7 year fixed annuity is that the rates of return are not all that great. I think the one we has is in the 5% range for the fixed part. I personally would want SOME of my money in the growing market but then again, if you aren't comfortable with that, don't do that. We also have some very nice whole life insurance policies that are getting a much better rate of return then the annuity, which we can take loans against so the money comes to us tax free in the end.

Something else to keep in mind is that there is an IRA to Roth IRA conversion feature next year so rolling your money into an IRA might be an option too. You can still do a fixed IRA so you aren't exposed to the market. The nice thing about the ROTH is that you aren't taxed on the gains or distributions and with the conversion feature next year there are no income limits. You have to pay taxes but you can spread that out over 3 years.

 

[BC]

Not trying to pry, but could you just tell me if your annuity is with one of the larger insurance firms in the country? If not, what made you choose the one you did?

 

[golfgal]

Not trying to pry, but could you just tell me if your annuity is with one of the larger insurance firms in the country? If not, what made you choose the one you did?

We are with Northwestern Mutual. They aren't the largest but they are the best and most stable company and they are mutually held so no TARP money and they pay dividends on their policies to the policy holders, not to stockholders. We have been with Northwestern Mutual for about 20 years with various products and investments.