retirement

Getting out of a variable annuity

Don TaylorQuestionDear Dr. Don,
I invested in a variable annuity contract that I've owned for more than seven years, so there's no longer a surrender charge if I want to take my money out of the annuity. I don't like the annuity (its fees are too high). Can I change it now, and would that be better for me? I'm 71 and retired. The annuity is worth about $95,000. I hate keeping it where I have it and am mad I ever got one.
-- Barbara Boxed-In

AnswerDear Barbara,
The issue in transferring the money to another annuity is that you restart the clock on the surrender charges. The issue in moving the investment into something other than an annuity is that you'll lose the tax deferral feature of the annuity. You'd have to talk to your tax professional about how big an impact that would have on your income tax return. Take a look at the Securities and Exchange Commission publication, "Variable Annuities: What You Should Know."

For many retirees, their Social Security payments provide the annuity component of their retirement income. A bonus there is that it's indexed for inflation without the retiree paying a premium for that indexing.

Take a look at the big picture and not just this annuity. There may be better places to have this money invested. Whatever you do, don't do it without getting a second opinion on your decision. I'd recommend the second opinion come from a fee-only financial planner. Don't sign a new annuity contract until you're absolutely comfortable with that decision.

Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.

Ask the adviser

To ask a question of Dr. Don, go to the "Ask the Experts" page, and select one of these topics: "Financing a home," "Saving & Investing" or "Money." Read more Dr. Don columns for additional personal finance advice.
 

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.

News alert Create a news alert for "retirement"

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
CD & INVESTING NEWSLETTER

Learn the latest trends that will help grow your portfolio, plus tips on investing strategies. Delivered weekly.

Blog

Jennie Phipps

New trick for Roth IRA savers

The IRS recently approved another way to get savings into a Roth via the back door.  ... Read more

advertisement
Partner Center
advertisement

Connect with us