Credit Union Selling Annuities

Q. My husband and I spoke with a financial advisor the other day (he is a salaried employee of our credit union so we are not "clients" of his) regarding two of our retirement accounts: his is a 401K with his previous employer and mine is a rollover IRA. I managed these accounts myself during the boom years, but feel "out of my league" in present market conditions.

The more volatile the market, the more conservative my impulses. I really want to protect these two nest eggs and grow them over time (they are currently worth about $230K total), while my husband starts fresh in his new401K plan. We also have about $50K in non-retirement CD's and cash savings.

The advisor mentioned a product called the US Allianz High Five variable annuity, which sounds like it might be a good choice for the two "nest egg"accounts. I've spent this evening reading mostly negative things about annuities, but we do seem to fall in to the "it might be right for you if..." category, mostly because retirement is still 20 years or so off.

Do you have any thoughts on this topic as it relates to us or this product in particular? My husband and I are 44 and 42 years old respectively, with two young children, ages 7 and 11. We live on one adequate but modest income.Saving is second nature--if only we had a similar talent for investing!

A. I appreciate you taking the time to do some research and to ask questions. That will help protect you greatly in the long run when it comes to investing!

First, don't be fooled by the fact that the person you spoke to is a salaried employee of the CU. Having worked in a bank environment, I am very familiar with what goes on there. CU and Banks make more money off of investments now than they do on any other banking product. They have intentionally moved to using salaried employees because they can give them the incentive to sell by just paying $50 or so each time they sell a product.

The CU is the one who will get the 5-7% commission on the Allianz annuity. There is absolutely no reason for your retirement money to be in an annuity (See my article on IRAs in VAs if you haven't already read it). Just because the person is salaried does not mean there isn't a conflict of interest.

Secondly, it is important for you to keep flexibility. By that I mean the ability to change your investments and advisors without facing any surrender penalties. There are ways to give yourself the conservative position without losing that flexibility.

For instance, I use a proprietary money management system for my clients that allows them to participate in the markets while significantly reducing their potential for loss (in many cases to less than 5%). It is designed for those who want to grow their money without losing their shirt. For my clients, there are NO commissions, surrender penalties, time commitments or set-up fees. They keep complete flexibility while having someone they trust who watches over their money on a daily basis and takes action when necessary to protect it.

It sounds like you could use something similar.

Your posted comments on this and other questions are welcome.
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