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I h ave an IRA ACCOUNT in CD which will mature shortly. I am thinking of putting it in an annuity. This is a single premium deferred annuiy with equity index option. Suppose to pay interest based on the S& P 500. I am not sure if this is a good investment? I am 70 yrs old now and will be required to withdraw 10% each year at 70-1/2 year old - and doing so will not be penalized by the company. How does an annuity account compare with CD's, MM, etc? Is this a good move? I would aprpeciate any help from someone who knows annuity, insurance, etc??? Thanks.
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I'll speak up although I know little about annuities other than the fact that sales commissions are lucrative and fees are high (maybe a connection?). If you want to invest in an s&P index type fund, there is no more expensive way to do it than to buy it through an annuity. CDs and MMFs are much more conservative and you won't loose money, although you won't make much either. Your circumstances determine if you will be needing this money soon and that would be the main factor determining whether you might want to have a lot in stocks. My advice is to read everything you can and make an informed decision. Alternatively hire a fee based financial planner who doesn't stand to benefit from selling you something.

I am not impressed that the annuity company isn't penalizing you for government mandated distributions.

The supposed advantage of annuities is tax deferral- which is irrelevant in a IRA.
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Dear PERLA - Congratulations on reaching the point where you begin drawing from your IRA! Regarding your transferring to an annuity... why not consider using a "Flexible Premium Variable Annuity", where you may (if additional funds become available) add to the balance & you may choose among several investment options (you can swap & transfer, etc.) to allocate your funds, depending upon your investment risk tolerance... Explore your options! Good luck & happy holiday. PP
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With all due respect to peppermintpatty who is in the insurance/annuity business, Perla could diversify among assets within the IRA without paying the expenses associated with an annuity. It sounds to me like the question was one of a annuity inside the IRA. Of course, earned income would be needed to add to the IRA (if it can be done at all.)
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Greetings, Perla, and welcome. You wrote:

<<I h ave an IRA ACCOUNT in CD which will mature shortly. I am thinking of putting it in an annuity. This is a single premium deferred annuiy with equity index option. Suppose to pay interest based on the S& P 500. I am not sure if this is a good investment? I am 70 yrs old now and will be required to withdraw 10% each year at 70-1/2 year old - and doing so will not be penalized by the company. How does an annuity account compare with CD's, MM, etc? Is this a good move? I would aprpeciate any help from someone who knows annuity, insurance, etc???>>

It sounds as if you're interested in maintaining the tax deferral of the IRA. If so, using an annuity for that purpose is somewhat like using an umbrella indoors when it's raining outside. You don't need the extra expense of the annuity to continue the tax deferral. Also, read the fine print of the annuity carefully. The guaranteed return on that annuity is almost certainly not based on the total return of the S&P 500 Index. Instead, it's probably tied to the capital appreciation return which excludes dividends. Historically, the latter provide about 40% of the total return in the S&P when reinvested. Thus, on the upside the index could be 10% for the year, but you would only see 6%. On the downside, the annuity would guarantee you wouldn't take a loss and instead would probably get a 4% return or so. Thus, that protection doesn't come cheap but it does provide some downside security. For me the cost is too great given the fact that downside doesn't come all that often.

All told, unless you desire the guarantee in the annuity, IMHO you're money ahead just rolling that CD to an index fund like the Vanguard 500. You can still take your required minimum distribution without a problem, will enjoy a full return in the S&P 500 index, and will have far less expense in doing so. It all depends on you, your need for a "steady" income source, and your ability to tolerate the ups and downs of the stock market.

Regards….Pixy

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