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Author: IrisOrlen Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75537  
Subject: annuity Date: 8/15/1998 11:12 AM
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I have had a T>S>A> since 1989 to which I contributed approx. $200 per month. I now have about $31,000 annuity value and $27,000 surrender value. am 63,probably will retire from teaching at end of this year or next. I would like to have my money now so I can invest in it myself as I do not think I am getting a very good return?(do You?) but is seems so complicated. I guess I can take it montly or quartlerly for not very large sums the remaining to be paid in the last of three years. However If I read correctly they will still skim off%20 plus taxes. How should I handle the withdrawal and what do you think over all? I can give more information if necessary. I am in a quandry. thanks potatowagon
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5026 of 75537
Subject: Re: annuity Date: 8/16/1998 10:37 AM
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Greetings, Potatowagon, and welcome. You asked:

I have had a T>S>A> since 1989 to which I contributed approx. $200 per month. I now have about $31,000 annuity value and $27,000 surrender value. am 63,probably will retire from teaching at end of this year or next. I would like to have my money now so I can invest in it myself as I do not think I am getting a very good return?(do You?) but is seems so complicated. I guess I can take it montly or quartlerly for not very large sums the remaining to be paid in the last of three years. However If I read correctly they will still skim off%20 plus taxes. How should I handle the withdrawal and what do you think over all?

Just for fun, let's say you started your $200 deposits on July 1, 1989 and ended them on June 1, 1998, or ten years later. You deposited $24,000 for an annuity worth $31,000. Your compounded annual growth rate for that period comes to an amazing 4.9%. Over the same period, stocks had annual returns of 18.5%, long-term government bonds provided 11.4%, Treasury bills gave 5.4%, and inflation averaged 3.3%. So did you get a very good return? I think the answer is obvious.

Should you now switch to something else? Perhaps, but that depends on what you intend to do with the net proceeds. You might be taxed at ordinary income tax rates on any money in the annuity (i.e., your contributions and all earnings) that has never before been taxed. You may also face surrender fees that will be imposed by the insurance company that holds the annuity. The taxes may be avoided, though. I suspicion you have the annuity through a 403b plan connected with your teaching job. If so, you probably made pre-tax contributions to fund that annuity. Thus, I see no reason you cannot arrange for a surrender of that annuity in total and then transfer the surrender value to an IRA of your choosing. You have to run the numbers, though, to see if that action makes sense. Will the net surrender value produce at least as much -- or better yet, more -- net income to you in the new investment as compared to leaving it in the annuity? If so, the switch makes sense. If not, you're better off where you are. Only you can run those numbers and determine the answer.

Regards…..Pixy



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Author: galleta Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5312 of 75537
Subject: Re: annuity Date: 9/3/1998 12:32 PM
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Pixy,
Could he rollover his annuity into another annuity such as Fidelity Annuities, which is tax-deferred, variable. In this way he wouldn't need to pay taxes on all and continue with a higher rate of return? I'm sure we've all made some investing mistakes (I know I have), but I don't think the game is over and it's not too late to learn.

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5323 of 75537
Subject: Re: annuity Date: 9/3/1998 5:40 PM
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Galleta, you asked:

Could he rollover his annuity into another annuity such as Fidelity Annuities, which is tax-deferred, variable. In this way he wouldn't need to pay taxes on all and continue with a higher rate of return? I'm sure we've all made some investing mistakes (I know I have), but I don't think the game is over and it's not too late to learn.

If it's a run of the mill tax deferred annuity, then yes a Section 1035 exchange for another annuity can be made to avoid tax impacts. If it's part of a 403b plan, though, I'm just not sure what exhange can be arranged. That's something for the plan administrator to answer.

Regards….Pixy



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