Annuity... Good or bad?

[3Hotdogs]

Cousin, age 77 is selling business. He will net 600k. He will have no other income but SS and $1,200 net from a rental property.

Sales agent is presenting the idea of an annuity.

Your thoughts?

[Abnredleg]

1. A single payment immediate annuity

might meet his needs, given his age. Does he have a wife or children? If he wants to leave money for an inheritance then annuities may not be the way to go. If he does go with an annuity, he needs to stay away from variable annuities - that exposes him to too much risk and he will loose more to fees and commissions.

https://www.investopedia.com/ask/answers/093015/what-are-main-kinds-annuities.asp

[CincyDem]

2. Have him call independent financial advisor.

You're looking for a firm that is a fee only Registered Investment Advisor. Look at the bottom of their web page for the phrase "Securities offered through blah blah blah"...where that's the name of their broker. When you find that, move on because they're not really fee only.

Find someone you like and sign up. Get everything in place. Probably cost 4-6k for the first year's fees but you can always, at any time, walk away. Probably work it to make sure that your friend's 600k gets structure right at the beginning because it's a pain in the butt to try to do it again if it's not right.

A SPIA could be part of a solution and, as in all thing finance, rarely is one thing all of the solution.

Good luck.

[safeinOhio]

3. Might look into investing $500K

into high quality dividend stocks and cash in 7% of the portfolio every year.

Pretty much what I do and have been retired for many years, only I've been cashing in 3% a year for a very long time. With the growth added to my portfolio. With my yearly withdraws, my original investment has stayed the same. At his age 7 or 10 percent would not hurt.

First I'd talk to a respected broker and run this by him or her.

I have everything paid off so my expenses are low no need to pass lots of it on after my death.

[flamin lib]

4. Remember the word 'fiduciary'

A fiduciary is required to put the client's interests above all others including their own. When interviewing brokers/advisors it is important to know if they are acting as a fiduciary.

[lastlib]

5. An annuity is basically income insurance......

I don't advocate them, but I imagine they have a place with people who don't have fairly reliable prospects long-term for steady income. They come with steep fees/premiums, though, and I think there are generally better ways to get the same income that an annuity might give.

Those are just my general impressions of them, not based on any objective evidence.