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Author: ltangel Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 922  
Subject: annuity strategy Date: 1/20/2011 9:43 PM
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At 59 and half I will be able to take out money from my variable annuity.Quesion:since i have had it for 17 years and it just recently bounced back to where it was 17years ago plus 10,000-I am thinking of moving 20% into the annuity moneymarket fund from the index 500 fund just so it stays at least at principle and move 20% to a growth fund and pray that in 14 months when i can start withdrawing this step will serve me well- When i called today to find out when I could start withdrawing the rep suggested a FIXED anniuty for some of the monies that I plan to withdraw at that time - my thoughts - would do better in a couple of dividend stocks or even CD's -if I had just put it in the bank -rule of 72 I would have doubled it for that length of time!!
Any thoughts on this strategy? Many thanks!!!
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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 904 of 922
Subject: Re: annuity strategy Date: 1/21/2011 11:09 AM
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ltangel,

You wrote, At 59 and half I will be able to take out money from my variable annuity.Quesion:since i have had it for 17 years and it just recently bounced back to where it was 17years ago plus 10,000-I am thinking of moving 20% into the annuity moneymarket fund from the index 500 fund just so it stays at least at principle and move 20% to a growth fund and pray that in 14 months when i can start withdrawing this step will serve me well- When i called today to find out when I could start withdrawing the rep suggested a FIXED anniuty for some of the monies that I plan to withdraw at that time - my thoughts - would do better in a couple of dividend stocks or even CD's -if I had just put it in the bank -rule of 72 I would have doubled it for that length of time!!
Any thoughts on this strategy? Many thanks!!!


I don't know much about annuities, but I think you'd have to provide numbers for anyone to evaluate this decision. Do you even know the numbers? Or are you just relying on some insurance salesman's opinion here?

BTW, I think annuities are great - for the people that sell them. But personally, I'm not an uneducated investor, so I think I can probably do as well or better without loosing a bunch of the money in sales commissions.

If you're looking at another annuity, make sure you're not getting stuck with high fees and expenses. Vanguard is supposed to be a great place to buy a fixed annuity product with your investments, if you want to lock in a guaranteed income stream. However, buying into an annuity wrapped investment product is usually a suckers game ... except in a few circumstances.

Fixed annuities at retirement are fine with me so long as you know what you're getting into...

- Joel

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 905 of 922
Subject: Re: annuity strategy Date: 1/21/2011 10:13 PM
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Keep in mind that your variable annuity has two stages. The accumulation phase, the one your are in, is when it grows. It can also be annuitized. Then the cash value of your account is converted to a contract usually to pay you a fixed amount per month for life, sometimes to you or your spouse, or sometimes for a guaranteed number of minimum payments. Once annuitized, the money belongs to the insurance company and you get only the benefit provided under the contract. It is no longer in your estate, and your heirs get nothing on your death (unless you selected a minimum pay period of say 20 years).

You can buy an annuitized annuity directly. That is called an immediate fixed annuity. So when your rep suggests a fixed annuity, is that an investment in the accumulation phase or an annuitized contract? If in the accumulation phase, you will want to know what yield they are offering. With interest rates so low fixed income investments are difficult these days.

Bankrate.com is showing the national average yield for a 5 yr CD is 2.0% right now. The max is 2.6%.

http://www.bankrate.com/funnel/cd-investments/cd-investment-...

Your idea of securing the funds in a money market is great for preserving capital, but the interest rate is likely to be well below 1% these days.

Note that you can move your annuity tax free to any other annuity company using a 1035 transfer. So if Vanguard, Fidelity, T Rowe Price, TIAA Creff or others can give you a better deal, don't worry about the income tax part. You may still have surrender charges to pay on your existing one, but that seems doubtful after 17 years. Moving your funds may mean a new sales charge and restarting the surrender charges clock.

If you need the income, annuitizing your contract could be a good deal for you. Then you don't have to worry about things. The insurance company takes the risk. Your rep should be able to tell you how much you can expect with the various choices.

Your plan to invest part of the funds for better returns is fine. You take on a bit more risk and hope for better returns. But the bottom line is you need to develop an overall retirement plan. How much do you need to retire? Where will the funds come from? How much from pension? Social Security? Other sources? Then you can begin to see how much risk you can afford to take to fund your retirement.

Good luck to you.

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