Dear Dr. Don,
I have a 10-year deferred annuity ($250,000) that is 60 percent bonds and 40 percent stocks and it has been losing money since I purchased it last year. Am I better off to stay with it or to pay the 9 percent surrender penalty and put the money in CDs that may earn 3 percent, but at least won’t be losing me money?

I started out with the annuity invested in the ING Lifestyle Growth Portfolio and switched it to the ING Lifestyle Moderate Growth Portfolio three months ago because of the losses suffered in the first investment. I am 64 years old and plan on needing the annuity income in 10 years.

Dale Drubbing

Dear Dale,
You face a difficult choice, but I don’t think paying the 9 percent surrender charge and moving the money to CDs yielding 3 percent is the answer. To take a $22,500 hit to hide in CDs that aren’t likely to keep pace with inflation is just another way to lose purchasing power on your investments over time.

The answer for most people is to review the investment options available from the annuity provider and to move the investments into subaccounts that better match your tolerance for risk.

Surrender charges typically decline over time, normally over a five- to seven-year period. This isn’t forever. Often the annuity contract allows you to take partial distributions (10 percent to 15 percent) from the account each year that won’t trigger the surrender charges.

If you decide to take this approach, you should work with your tax professional to manage the tax impact of the distributions.

My best advice is for you to meet with a fee-only
financial planner and have him or her review your annuity contract, your income needs in retirement and your investment options.

Get a second opinion if you don’t like the first. The National Association of Personal Financial Advisors provides a directory of fee-only planners on its ”
Consumer Information” Web page.

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.”