Hello,

My financial advisor is suggesting I transfer all my SEP IRA $ from the past in addition to my 2007 allocation into the MasterDex 10 Annuity from Allianz.

I'm 37, no kids and don't plan on having any, don't own a house though I'd like to in the next couple of years and make between 70K & 100K a year.

Do I go with his recommendation?

Thanks

Hmmmm, age 37....

That's kind of young to be putting your money into a boring savings instrument like an annuity. Fixed Indexed Annuities are BORING and annuities are a safe place to put your money after you've made your money.

When it becomes foolish to keep paying income tax on your bank CD interest that you are not even spending and/or you've finally grown tired of losing/risking your money in the stock market and perhaps are looking for safe guaranteed lifetime income or to pass the asset to your heirs free of Probate Court and EXEMPT from creditors (Florida) then it's time talk about an annuity.

The problem with the MasterDex 10 for a 37 year old is the fact that contract DOES NOT have a surrender charge schedule like most policies. The cash surrender value equals 87.5% of your premium @ 1.5%. That contract would be much more suitable for a 65 year old who wants to start taking income at age 70.

See illustration below:

You can't just take your money out after 10 years (age 47) and do something different if you wanted to....you as the contract owner/annuitant have to take your payout over a ten year period to get the full annuitization value.

This is called a two-tiered annuity.

That's not necessarily a bad thing....but it is something you should understand.

__________________
Gary Spicuzza, *SAFE
Copyright 1956
No Rights Reserved
*Self Appointed Financial Expert

Thanks for writing back Gary.

I guess I'm ok with not accessing the full amount of my SEP since I don't intend to use it until I'm retired.

But even after reading the brochures, I'm not sure if I can get the balance of my money out if I want to, after the initial ten years (regardless of the IRA rules)

thoughts?

You can get all the money in the contract out, it just has to be paid out over a minimum 10 year period after you've held the funds in deferral for a minimum of 5 years. This is no big deal for an IRA Annuity as most people only take their Required Minimum Distribution at age 70.

As long as you understand to get the highest payout from that contract you must spread the distribution over 10 years you'll be fine and will be quite pleased with Allianz.

Referring to my illustration and to make some technical points...

If at age 37 you put $100,000 in that contract at age 47 you'd have $204,112 in Annuitization Value (the 10 year payout) but your Cash Surrender value would only be $101,547.

This means that IF you wanted to rollover your IRA Annuity into something else you would receive the $101,547 NOT the $204,112.

Allianz has some of the highest paying Fixed Indexed Annuities on the market and their MasterDex 10 Plus pays a 10% premium bonus on all new money coming into the contract for the first 5 years.

Of course it is that fact, the 10% bonus for 5 years coupled with high indexed credits that cause the distribution restrictions.

Again, none of this is a bad thing as long as the client understands these things. For someone whose stated goal is safety of principal for retirement savings then you really won't beat an Allianz two-tiered IRA Fixed Indexed Annuity although Aviva is my #1 favorite company.

__________________
Gary Spicuzza, *SAFE
Copyright 1956
No Rights Reserved
*Self Appointed Financial Expert