Q. You had a story about whether it’s smarter to give cash or an IRA to adult children. Would buying them a deferred annuity make sense? Or maybe a deferred annuity in your name with them as the beneficiaries (so they can’t sell off future annuity payments if they need cash now)?
A. We love to see people get creative with financial help for those they love, but this would be a costly way to go.
Generally, annuities have higher expenses because they are insurance-based products, said Jerry Lynch, a certified financial planner with JFL Total Wealth Management in Boonton.
He said most have expenses around 4 percent.
“If you compare that with an S&P 500 index fund of around .02 percent, the annuity would have to outperform the index fund by around 40 percent due to the additional fees on an annual basis, which I feel is impossible,” Lynch said.
He said he would start with an index fund, and as the account grows larger, consider moving into other areas of the market to diversify.
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