| Mutal fund based Annunity doesn't have any stock ticker sym? |
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skhoury
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| Mutal fund based Annunity doesn't have any stock ticker sym? |
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Hello all - please forgive me for this question, but I really do not not any better when it comes to Annunities...
I recently bought into an IRA with New York Life that is vested in Annunities. I suppose at the core of it, these are really mutal funds however they have no stock ticker symbol - they are "privately" held, even though they are big name funds (T.Rowe Price, Fidelity, etc..).
Can someone please explain to me how this works?...how is it that a mutal fund in my IRA doesn't have a stock ticker and is "private"?
Many thanks in advance,
Sam
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Tue Sep 26, 2006 6:58 pm |
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coaster
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Maybe the investment companies that you mentioned are just managing the portfolio behind the annuity. In that case, there's no mutual fund involved, just a collection of investments owned by NY Life and backing your annuity. I'm just guessing; I don't know for sure. You might have to ask NY Life.
BUT -- here's the big question: why invest in an annuity INSIDE of an IRA? The annuity is a tax-deferred vehicle regardless of where it's held; whereas the purpose of an IRA is special tax treatment for retirement funds. It's sort of like putting your important papers in a safe inside of a safety deposit box in a bank vault (for lack of a better analogy  )
~Tim~
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Tue Sep 26, 2006 7:33 pm |
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coaster
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quote:
Originally posted by muneepenee
1. mutual funds dont hav stok symbols kauz em dont be stoks..
Wrong -- mutual funds do have ticker symbols. They consist of five letters, ending in "X", e.g. VGPMX is Vanguard Precious Metals Fund.
~Tim~
Eye Candy : Why Whimsy
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Tue Sep 26, 2006 8:50 pm |
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BlankenshipFP
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The "funds" held by annuties are similar to mutual funds but are not exactly the same. They are called sub-accounts, and they do have identifying tickers, but you won't find them in the normal mutual fund lists. Morningstar does have information on many of these sub-accounts, but to my knowledge this information is only available to subscribers of their Principia and/or Advisor Workstation, typically advisors.
Your annuity company should be able to provide you with up-to-date materials on the sub-accounts.
Incidentally, while in general principle I would agree with muneepenee's comment about the inappropriateness of putting an annuity in an IRA, it's not always the wrong thing to do. I'll assume that you have an advisor who explained why putting an annuity in your IRA was important and the right thing for your circumstances, because if he didn't of course, he wouldn't be doing his job.
On the off-chance that he didn't explain the situation and lay out the alternatives to you, you might want to talk this over with an objective, fee-only financial advisor. You can find fee-only financial advisors at www.NAPFA.org , or www.GarrettPlanningNetwork.com .
Now, for the curious, the reason one might put an annuity in an IRA:
IF you are extremely risk-averse and you wish to put a "stop" on downside losses; and
IF you don't mind paying a premium in exchange for the "stop" protection; and further
IF you don't mind giving up some of your upside gain potential in addition to the aforementioned premium in exchange for the "stop" protection; and finally
IF you don't mind locking up your funds via a redemption penalty period of seven years, making it impossible to get out of the annuity without paying additional fees, in addition to the aforementioned premium and limits on upside potential
THEN it may make sense to put an annuity in an IRA. Otherwise, it doesn't make much sense.
Hope this helps -
Jim Blankenship, CFP®, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
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Wed Sep 27, 2006 2:13 pm |
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coaster
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Thanks for the excellent explanation, Jim. 
~Tim~
Eye Candy : Why Whimsy
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Wed Sep 27, 2006 4:03 pm |
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efflandt
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I am curious about the curious section that Jim mentions. The only choices in my 401(k) (prinicpal.com) are separate accounts that work like mutual funds with similar expense ratios. There is data on their accounts at Morningstar, but their own on-line info that updates every midnight is more up to date. There is no stop protection that I am aware of. They do not have any contribution minimums and used to have no limits shuffling between funds, but to minimize market timing they recently added limits for moving money into a fund (other than normal contributions or automatic rebalancing). If we manually move money from one fund to another (other than money market), we cannot move more money to that fund for a month. I guess their hope is that you will chose one of their fixed annuities when you retire, but you can also keep it invested in their separate accounts or move it to an IRA at another trustee.
I have my IRA's at Fidelity and did notice that they have variable annuities, but couldn't see any reason yet to select those over the broader selection of regular no load mutual funds or stocks. I have not noticed if Fidelity has any way to set stops on variable annuities or mutual funds. And I have not paid attention to minimum holding periods for their annuities, but minimum holding for mutual funds varies from 30 to 180 days (6 months).
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Thu Sep 28, 2006 2:15 am |
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coaster
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I think Jim's reference to stop protection shouldn't be confused with stop orders (or any other automatically-triggered downside market exit strategy.) If I remember my annuities right (no guarantee -- I forgot about subaccounts), some annuity vendors guarantee the principal. i.e. if you keep your money in for a certain minimum time, and the market declines in the interim, you can't lose your original investment. Of course, what he's saying is that you pay for that protection by reduced returns.
Close enough for a cigar, Jim?
Of course, getting just your original investment back after 10 years IS a loss -- a loss of value if not of actual dollar amount.
~Tim~
Eye Candy : Why Whimsy
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Thu Sep 28, 2006 3:14 am |
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BlankenshipFP
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Yes, coaster, that's pretty close - while some variables leave you to the vagaries of market fluctuation, many provide the downside protection that I mentioned above.
efflandt, this is different from the 401(k) sub-accounts that many plans have. Many of these are institutional or in-house funds that are similar to the publicly-traded funds, but with different expense ratios and restrictions (such as the trading restrictions you've mentioned above).
Regarding your Fidelity holdings and their annuity offerings, as coaster described, it's not a question of setting a stop - this downside protection is a component of the annuity itself, albeit at a significant cost.
Hope this helps -
Jim Blankenship, CFP®, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
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Thu Sep 28, 2006 2:18 pm |
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