It’s in a Roth IRA, not taxable account if I read it correctly.
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correct, that is my point. For regular folks, I would not recommend puts-and-calls in a Roth; my ‘fun’ (or gambling money) is just in my Taxable account.
as an aside, I was intrigued by the MOAT name, so did some backtesting. Since its inception, MOAT beat the S&P 500 barely: CAGR of 14.19 vs. 13.88. Not sure its worth the extra risk.
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Actually, selling covered calls isn’t that much of a gamble, since you’ll never be taking a loss, you get the money for the option sale. You might just be forced to sell the stock, though. I do that sometimes in my other Roth, but only if the strike price is something I can live with. The gamble is, if it’s a price you’d like to sell at, maybe you should just sell the stock.
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There are vast differences with annuities.
Of course if you believe you won’t live very long, you won’t go to the trouble to set up an annuity.
We viewed the annuities as a way to lower our overall portfolio risk, and since we do not have pensions, it took that place with a stream of retirement monthly payments. When we indicated our monthly cash flow requirement, FA set up with each of the annuities the amount of money from those (we signed prepared paperwork for this to happen). The funds go straight to our checking account and we get monthly statements on each annuity with a withdrawal.
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One is not ‘giving’ to an entity with an annuity - you are purchasing a product.
I do not live and breath financial products - my FA does. It may take time finding a FA that is a true fiduciary (doing what is in best interest for client). Our FA’s suggestion and product selection for annuities was with our dilemma to pull off money from our too big 401k and lower our overall risk. We purchased over a spread of time and when FA found products that would work well for us.
At death, the annuities have a cash surrender - they don’t lose value (go to zero) like a pension does (pension may be set up for surviving spouse at the time it is set up).
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The point is that to benefit, one has to outlive the already selective actuarial pool, not the actuarial table that SS uses. To paraphrase Clint, ‘do you feel lucky’?
Understand, but annuities substitute sequence-of-return risk but increase inflation risk. It’s a balancing act.
“At death, the annuities have a cash surrender…”
These annuities are fantastic… for the broker/FA, as they pay the highest commission.
But what you have purchased is an investment with life insurance wrapper. (or vice versa) For most folks, it’s better to keep life insurance and investments separate: but term life, and invest the rest. (OTOH, few really need life insurance in retirement.)
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True - it is an investment within Insurance Company. However we find we benefit.
There are strategy selection choices along the years, and within that choice you may have things like ‘index, equity index allocation, declared rate allocation, Declared rate, strategy spread, and strategy term’. Our FA reviews and discusses any change he sees will benefit us, and we can also review and ask FA any questions and advising.
The death benefit value is of course higher than surrender value (you surrender if after contract starts and you believe you made a grave error, you are paying to get out of the contract). However eventually the two values may be the same.
For example, the contract purchased in 2018 for $150K had a death surrender value at the end of 2019 of $169K, while the surrender value was $157K. On this particular annuity, there are 8 strategy options, and have annual election (30 day window to elect and change). On this particular annuity, we are drawing $600/month as a ‘gross withdrawal’. We began having withdrawals from annuity as income replacement in retirement.
A nice benefit of life insurance is tax free money to beneficiary.
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I went to Chase and selling cash covered puts and calls with existing stocks was what they talked me into doing, using their group of course. In this way, you are limiting the loss but you are also limiting the gain. As long as you can accept that fact, you’ll be ok.
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They do make money but if you have somebody who doesn’t want to worry about investments like my husband, it’s probably not a bad idea. I suspect one of my daughters who is an art person isn’t interested in the stock market either.
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Yes, we have a fiduciary FA. I also know that people who sell annuities make quite a bit. Had a friend who was an insurance agent and she told me some of the details and what to avoid in insurance and annuities (most of the time avoid annuities 99% of the time except in very few cases). We haven’t gotten to that point yet, I think it’s good to know about every tool. I do tend to take advice from the FA but make the final decisions.
Insurance also has a cash value/surrender value but it’s laughable. And my family ( parents and grandparents bought insurance products that I would never consider yet are still being sold. Whole life, just a big no. Again YMMV, different needs and things.
Just went through our holdings today. Found out there is a Treasury bond that’s tied to inflation. Love that, as that is what is worrying me. We only hold 14% in bonds but I still want them to work for us.
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Yes it is a good benefit, but so is the stepped-up basis on your portfolio. (under existing law).
But that still begs the broader question: do you need life insurance at all as a retiree? If not, then you are taking a smaller monthly payout to gain the insurance, i.e., you would be receiving more than $600/mo. absent the life wrapper.
btw: I can think of one good reason for life insurance – to ensure some $$ for a special needs child/dependent when you are gone. And then a second reason – although not necessarily ‘good’ – is to pay the estate tax for very large estates.
“most of the time avoid annuities 99% of the time except in very few cases…”
SPIA’s are reasonably priced bcos they don’t come with all the add-ons.
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There are caveats. IF your company pays for life insurance it may not be not tax free. And it should really be in a trust. I’m not an attorney but for this, someone should ask their attorney what the constraints are and they might vary by state. We have a lot of life insurance and consulted with an attorney because we wanted to make sure if anyone passed the money would go to the kids or spouse tax free. It costs us maybe $1,200 to set everything up(including putting the policies into a trust) but we knew it would be fine if the worst case ever happened.
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I still have life insurance, not from work, a product I bought years ago. I shipped my LTC insurance money to life insurance, I figure my kids have better chance collecting life insurance than LTC. But the insurance is down to 0 when my husband and I reach 100. I told my kids, jokingly of course, to pull the plug at 99.
Plus we do travel frequently so that’s another angle.
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I don’t put anything in my trust except for real estate properties. Lately, I’m thinking of TOD for those properties even.
Step up is for taxable, non IRA account, non Roth account. Most people have large IRA account so it doesn’t really work well for most people.
“The rest of the story” on phone change. Savvy DH had the T Mobile on the phone chat look up ‘fees and charges’ for our specific town and then agreed to signing up. At the total end of the costs, DH was assured our overall monthly cost would be $X. DH asked for a transcript of conversation to be sent, and it was. Now DH sees the total cost is higher in what we got charged - so after talking to T Mobile and referring to the transcript, T Mobile is honoring what was given as our total cost. Glad he had ‘the documentation’.
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Yes our life insurance was paid for by us.
We need to look into estate planning in our state more. Looking to see status on DD/SIL/grandkids staying in state (they live about 100 miles from us now). DD2 is in Orlando. Think we really want to stay in our state (AL) - we are not too far from DD2.
Now that I am ‘over’ the potential recurrent cancer scare (thoroughly checked out including bone scan and various lab testing for potential signs), trying to sort some other things out before we get into systematic steps on getting estate plan ‘done’. Decisions to make.
Have to decide some things with also checking with tax accountant input. Generally have some professionals in mind.
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Are you suggesting one transfers a tIRA into a life insurance policy and put that into an Irrevocable Trust so the benefit is tax-free to heirs?
We have some term policies that will ‘peter out’. At the time I had aggressive stage III cancer, and DH was the sole bread winner - so we needed a lot more insurance on him, and we got term policies, 30 year.
We have other policies that are paid for and we are not paying in - the dividends pay for the policy premiums. One can say ‘cash out and invest the funds’. We have it in place and don’t have any desire to change it.
My mother had two small insurance policies that paid out at her death at age 77. The grandchildren were the beneficiaries, and the almost $18K to each of them was grand for college use. DD2 still has funds in the stock account we put it in – due to scholarships and other ways tuition/college costs were paid, she had money left over that continues to grow. At mom’s death, her estate was all handled with the trust my dad had set up, and the five children were the beneficiaries (which some of us did also then spend on the grandchildren some of these funds).
Our monthly payout from annuities is what we need (I just gave example of one particular annuity and brief data about it, one of the monthly payouts we have).
If we had to do it over, we would have gone 30 year term insurance - but w/o the internet and more difficulty ‘shopping around’, we did what we did at the time. We have pretty good life insurance, as far as quality of the company and what we have for what we paid for. What we would have saved on the cost of the insurance we could have invested. Opportunity cost. More benefit from time value of money.
What we learn we pass on to our two daughters. They have term life insurance, with more insurance on SIL. We pay for one policy on SIL because it helps us SWAN - and DD is the beneficiary.
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Yes, we have to revisit everything this year. Tax laws have changed so I want to make sure I understand everything and then make changes, as needed.
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