Dear 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
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.
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