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URL:  http://boards.fool.com/in-return-for-that-7-you-dont-get-your-26574445.aspx

Subject:  Re: Annuities = Bad Choice For All? Date:  4/18/2008  11:33 AM
Author:  dinkysue Number:  62293 of 88062

In return for that 7%, you don't get your principal back. Right? Recently I was buying credit union CDs for a guaranteed 5.1% and I am getting all my principal back at the end.

I'm sure you could do calculations that would compare the value you get if you invest say $200K this way, 7% per year for 25 years and you don't get your principal back in the end, to the value you get if you invest $200K for x rate of return over the same period but you do get your principal back.


I tried it on my little financial calculator which sometimes works. I used a present value of $200,000, an annual payment of $14,000 (7% of the principal), a time period of 25 years with a future value of 0. This came out to be an interest rate of 4.86%. Sort of like a 25 year reverse mortgage. Might be an ok deal in some instances but not for me. I believe a real 7% might start to get my interest. 5% on a FDIC insured CD would be better but then the time frame becomes a problem as it is with the annuity.

Dinkysue
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