Thanks, all. Some good advice for Cosmic.
Here's our next question from Elizabeth
Let's hope our Elizabeth can answer it :)
Hmm. I would be wary of something with a lockup period like that. Let me try to look up this particular investment, but in the meantime, can you tell me about what interest rate it's promising or what the fees are like? Those would be important questions to answer.
There are always fees. It's just a question of where they're hiding!
I don't know the product but to lock yourself in for 10 years seems awfully chancy. At some point all of the monetary easing that the Fed and other central banks are engaging in will fuel inflation. That will eat away at all fixed-income type holdings
So it's a fixed rate annuity that promises 3% today, right? How long is the interest rate guaranteed? Do you have an upside if rates rise?
Right - so the expenses are there, it's just that what you see on your end is "net" of fees. I would check the prospectus to find out what the fees are that your returns will be "net" of. Again, I believe all of us would be very wary of that 10-year lockup period. If inflation takes off, it could be really detrimental to be stuck in something yielding that little.
Also, Elizabeth, many of these annuities have an initial interest rate and it's only guaranteed for a year or two. After that, the rate can actually decline. That's a big risk too. Check the paperwork to see if it affects your product before you buy it
They're essentially the same
Kathy, here's a question for you from Jorge
Generally speaking, I'd say you're better off putting your money into a lower-cost ETF rather than an annuity, Jorge. But the answer would depend on your tax bracket and how you handle your money. If you're in the highest bracket now and likely to trade a lot before retirement, there may be an argument for a low-cost annuity.
We seem to have gravitated quite a bit from the concept of "simple investing."
And didn't we start out by saying that investing isn't all that complicated? ;) I guess the real answer is it doesn't have to be, but it can be.
Alright, we're down to the final few minutes here. Looks like we have time for two more questions, from Jen and Paul
Hi Jen - First of all congrats that you're saving so aggressively. You are on a great track.
I think Kim's story has a lot of useful info on SEPs vs 401Ks
Thanks, Manny. Want to take this last question from Paul?
Elizabeth knows the fund, too
Yup - it's got a large component in Treasury Inflation Protected Securities. It ought to be a great inflation hedge.
Thanks, Manny. Elizabeth and Kathy, anything else you want to add before we finish up here?
No, but thanks for being here and participating!
Thank you to everyone for your great questions!
Thanks for joining us. These are always fun and informative for us, too
Yes, absolutely. Thank you all for joining us. And of course, a special thanks to Manny, Elizabeth and Kathy