A friend of yours has left his job and must transfer his 401(k) plan to an IRA. He is 40 years old and has $100,000 saved in his 401(k$ plan. Your friend has visited 3 different brokers and has received 3 different recommendations. The recommendations are listed below. Explain why each recommendation might not be a good idea. Explain the holes in the brokers' recommendation and the reasons for the recommendation and give a recommendation on what you feel your friend should do with his retirement "nest egg".
Recommendation 1-Broker 1 recommended that your friend open an IRA at his firm and use the entire $100,000 to purchase a variable annuity. The broker can then purchase shares in different sub-accounts , or shared, within the variable annuity.
Recommendation 2- Broker 2 recommended that your friend open an IRA at his firm use the $100,000 to purchase mutual fund class B shared from a variety of different fund families,
Recommendation 4-Broker 3 recommended that your friend open a taxable non-qualified account and purchase stock of several "blue chip" companies. The total investment would equal $150,000. Your friend could purchase $150,000 of stock by buying on margin.