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jsalemi wrote:

Thanks for the tip. I'm rather fond of Vanguard, and would prefer to deal with them. I sent for their prospectus, and I'm going to do a bunch of reading in the next couple of months. I have until at least January, since my mom isn't going to put the house on the market until after the first of the year.

My husband and I just went through trying to decide whether to keep/get rid of an annuity that he had purchased long ago, before he paid any attention to investing. A couple things you should be aware of about annuities:

1) They are primarily retirement investing vehicles. Once you put the money into the annuity, you can't take it out until a certain age (I think 59-1/2). Since your mom is over 76 that probably isn't an issue.

2) Annuities usually have surrender charges which are spread over 7 years. For example, if you cancel the annuity in the first year, you pay a 7% charge; in the second year, a 6% charge, and so on until the surrender charge expires.

3) Annuities are an insurance product as opposed to a straight investment vehicle. The costs are higher than a no-load mutual fund because you are buying some insurance. This tends to cut down on the return on the investment.

Given what I've learned, I'm not a big fan of annuities, since you can get the same or better return outside of the annuity, with much less hassle and paperwork. The only real benefit I can see to the annuity is that accumulations are not taxed until they come out of the annuity. At your mom's age, does she really need that income tax protection? Particularly, since $250K of the proceeds of the home, if she's lived in it for more than two years, will qualify for the CG exclusion.

You should take into account that interest rates are likely to be on the rise in the future, in your considerations re: bond funds.

My father is nearly 68. He's almost totally invested in stocks, with some tax free muni bonds in his portfolio. My dad was Foolish, before the Gardners "invented" such!

Fool on! And good luck!

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