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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75340  
Subject: Re: Convert a CD to a Fixed Annuity ? Date: 7/26/2000 2:34 PM
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Dan (a.k.a. dannari), writes:

<< The same thing happened to my 83 year old mother. An insurance sales agent rented space at her bank. He basically talked her into a fixed annuity contract for the CD funds which had matured.

Luckily my mother asked me about it. I looked at the contract and realized it was an annuity. The 6% interest was only guarenteed for the first two years. There would have been a penalty to get her money out of the annuity before 6 years. In California there is a short period of time (30days) to change your mind. I went with her to the bank and got her out. Her money is in a 1 year CD at another bank.
>>

As I work a great deal with Seniors, I must point out that converting CD funds to an Annuity can make a LOT of sense . . . . DEPENDING on the issues in any particular case. My point here is that it's NOT automatic that such a transfer of funds is a "bad" or "wrong" decision.

Obviously, many if not most Seniors put their money into CD's because they have some aversion to investment risk. But many of them also don't like having to pay taxes on the earned interest of CD's nor decreasing the amount of Social Security benefit do to increase taxable income from the CD's. So, very often a Fixed Annuity makes a lot of sense. (Note: I am not suggesting that an annuity is where ALL or even most of their assets should go.) In fact, in many cases, (this should send some chills down some Fools spines ;-) a life insurance contract is good choice and better than an annuity to transfer such assets.

So, let's not get paranoid over terms like "annuity" or "life insurance". Do the analysis and make the decisions based on specific individual objectives. Neither everyone nor everything is the same, so we need to keep things in perspective.
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