Your Bank Advice Is Bad

John wants to roll over a 401(k). His bank is encouraging him to roll it over to fixed annuities. Is that a good investment? Dave says no way.

QUESTION: John in Tucson wants to roll over a 401(k). His bank is encouraging him to roll it over to fixed annuities. Is that a good investment? Dave says no way.

ANSWER: That’s what you get if you go to a bank for investment advice—investment advice that sucks. That’s horrible. No, I would not do that. It’s atrocious. I would just put it in a good IRA—a traditional IRA—in a series of good growth stock mutual funds. I would put it across four types of accounts: growth, growth and income, aggressive growth and international.

Look at the track record of an investment, and the investment track record is so ridiculous that it gives you a comfort level even though there’s not a guarantee. There are mutual funds that can help you do that exact same thing. For instance, I own one mutual fund that’s over 70 years old and has averaged almost 12% over that 70 years.

Let me just tell you: If the government destroys mutual funds and real estate completely, your little annuity at your bank isn’t going to make it either. The banking system will fail if the mutual funds all close because they’re all based in publicly traded companies, and so virtually every company you drove by on your way to work would be out of business. The bank’s not going to survive that. If you’re looking for something that survives the apocalypse, you buy bullets and water. But if you’re looking for an investment, you go into good growth stock mutual funds and into paid-for real estate. That’s what I do.

I think your bank advice sucks. It’s really bad advice.