7 Replies

I am a newbie to investing. I have 400K in a variable annuity earning around 4%. I know investing in real estate will probably earn more but I am skeptical about moving funds out of the Annuity to invest. I am 63 years old. Do anyone have any suggestions on what I should do. I have already talked to a financial planner and financial planner is suggesting that I leave it in the Annuity even though I am not making much of a return on my investment. Should I invest in Real Estate? 

You should consider your surrender charges if you have held the annuity for only a few years. Many financial advisors want you to keep annuities because they continue to get a commission.
I invest in stocks and have 43 rentals. I like rentals, but a lot of people find it too much work.

Thanks Kim for the reply. Do you know of any way to get around or reduce the surrender charges ?

@Bobby Hughes ,

I'm not sure what your options are with an annuity that has already been established, but I would ask your financial adviser / annuity account representative if you have the option to convert that annuity to another form of tax-deferred retirement account. If you can, you can take advantage of a SDIRA (self directed IRA), and at a minimum of involvement from you invest in a REIT, most of which can provide returns of AT LEAST 8% and some over 14%.

You can also loan money out from your SDIRA and earn money that way, but you have to be educated about vetting the borrower with regards to their creditworthiness and their experience at real estate investing.

If you're more interested in being involved in your real estate investment, you can make over 20%, but that route requires A LOT of education as well as personal involvement in the management of your real estate holdings.

If you can't do anything tax-deferred with the annuity, it might not be worth it because of the taxes you would have to pay upon the withdrawal of the money to move it to another account.

I agree with @Max Kim about your financial adviser recommending the annuity for more personal reasons, or just for the fact that he might take an ultra conservative view given your age and your goals.

I'd be interested to know what your adviser / annuity representative says about the options for moving funds out of annuity.  I thought that those investments were typically a surrender of the cash value of your account in return for a steady monthly payment for the duration of your lifespan.

Thanks Joshua. I will check with financial planner concerning the SDIRA. I actually blame myself for not more carefully conducting due diligence on the surrender charges. The financial planner did not discuss the surrender charges in great detail with me and now I see the reason why he did not go into a detailed explanation. But I appreciate your thoughts on examining other options that I might have. 

@Bobby Hughes

If you are self-employed at least on a part-time basis you can explore opening a self-directed solo 401k, transfer some or all of your former employer 401k plan and then invest the funds in physical real estate. 

Mark Nolan is on tge right path. In most cases even if you don't have a company you can set up a company or sole proprietorship to take advantage of the solo 401k. Google Jim Hitt Amercan IRA he manages over $300,000,000.00 in funds and he has a deep business knowledge and has built funds.

What Joshua Nudell says, I like as well. In my company I do all the work. We buy renovate and sell properties. My clients make an average of 6% to 7% per property. If we get to flips per year then they can avesrge 10% to 20% per year. So that ties out with what he says. Also if you do the work yourself that number should hold true as well where you make above 20% a year. In most cases rentals will not bring this type of return.

Okay, thanks everyone for such great input. I am going to have to educate myself on the Solo 401k as I am not familiar with this type of 401k. Once I understand this type of 401k, I will start pursuing some of the options presented here in your posts. Thanks again everyone. 

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