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I had posted this in the Ask a Question section, and someone referred me here. I hope this is the right spot.

My grandmother left me a fixed annuity about 8 years ago. She had used all the principal from it. There is still a sizable amount, and I've withdrawn from it once or twice (emergencies) and paid the extra 10% penalty for not being at least 59 1/2 (another 20 years away).

Every year I get a statement from the annuity company telling me what the interest rate is for the coming year (this year 6.6%). I think I would do better to surrender the annuity, take the tax bite, and invest the difference myself. Am I right? Would I do better to take a little each year to invest, and spread out the tax pain?

Any information/comments are appreciated. Thanks.
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Why not just move the annuity to a fund company like Vanguard, Janus, Fidelity and invest in their funds? You would take a surrender charge but not a tax bite which is the big issue here.

I think you may do well to read a book on annuities like, "Guaranteed Income for Life" by Michael Lane so that you understand the options you have within an annuity since they can in many ways be great for taking advantage of tax-deferred growth if the costs aren't too much.

JB
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KandS2, you asked:

<< I had posted this in the Ask a Question section, and someone referred me here. I hope this is the right spot.

My grandmother left me a fixed annuity about 8 years ago. She had used all the principal from it. There is still a sizable amount, and I've withdrawn from it once or twice (emergencies) and paid the extra 10% penalty for not being at least 59 1/2 (another 20 years away).

Every year I get a statement from the annuity company telling me what the interest rate is for the coming year (this year 6.6%). I think I would do better to surrender the annuity, take the tax bite, and invest the difference myself. Am I right? Would I do better to take a little each year to invest, and spread out the tax pain?
>>

The fact of the matter is that there's simply not enough detail about YOUR financial situation for ANYONE to give you a meaningful response that would be appropriate for your question. For example, the previous poster suggested that you would NOT pay any tax and I'm sure YOU already know better than that. In fact, I think that poster had it backwards as you'll pay taxes when you surrender it and you probably would have to pay ANY surrender charges. Again, it'll take getting to know the details of that annuity and of your financial situation to have an idea of just what is better or not. After all, what's "better" for me may not be "better" for you.

You may want to consider consulting a tax accountant and or an annuity expert (likely to be a life insurance agent) so that the annuity contract can be examined and your option presented to that you can make an INFOMRED decision.

If you're looking to try and get a better return than the 6.6% fixed rate, then you might want to consider doing a 1035 exchange into a variable annuity . . . especially if you want to avoid taking the tax hit for surrendering the whole thing. These are only a couple of the options that might be "better" . . . other options may come to light after a thorough analysis?

Sorry that that's not the kind of answer you were looking for. But if you really want to make an informed decision as to what really "better" . . . .this is about all I can suggest. I hope it helps some.


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Let me clarify my past post.

Many mutual fund companies are now offering variable annuity programs, that if the money stayed within a VA there wouldn't be a tax bite under a transfer using the proper form to move an annuity from one contract to another(This should be VERY analogous to moving around an IRA which I believe can also be done).

Here's a link to a list from Forbes of no-load Annuity companies: http://www.forbes.com/forbes/98/0209/6103108a.htm

Notice names like Vanguard, T. Rowe Price and Janus there and I'm 99.99999% sure that those companies among others run versions of their funds that are sub-accounts within a VA contract that they provide and this is what I was referring to by getting into their funds was to keep the money WITHIN the VA wrapper but get THOSE BETTER funds. Perhaps, I was a bit hasty in trying to convey that option.

JB
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I had posted this in the Ask a Question section, and someone referred me here. I hope this is the right spot.

My grandmother left me a fixed annuity about 8 years ago. She had used all the principal from it. There is still a sizable amount, and I've withdrawn from it once or twice (emergencies) and paid the extra 10% penalty for not being at least 59 1/2 (another 20 years away).

Every year I get a statement from the annuity company telling me what the interest rate is for the coming year (this year 6.6%). I think I would do better to surrender the annuity, take the tax bite, and invest the difference myself. Am I right? Would I do better to take a little each year to invest, and spread out the tax pain?

Any information/comments are appreciated. Thanks.


If you would like to have this money invested in a Variable Annuity rather than a fixed annuity, you can do a "1035 Exchange" to another Carrier. Vanguard for example has a Variable Annuity that allows you to invest your money in many different types of funds. One of the funds I like is the 500 Index Fund. TIAA-CREF also has low expense ratio variable annuities.

Here are their websites:

www.vanguard.com

www.tiaa-cref.org

At the top of your screen is a "search" box. Type in this; "1035 exchange". You will get more information than you need.

cf



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<<Notice names like Vanguard, T. Rowe Price and Janus there and I'm 99.99999% sure that those companies among others run versions of their funds that are sub-accounts within a VA contract that they provide and this is what I was referring to by getting into their funds was to keep the money WITHIN the VA wrapper but get THOSE BETTER funds. Perhaps, I was a bit hasty in trying to convey that option.>>

That's okay, I understood what you meant.

KandS2
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<<At the top of your screen is a "search" box. Type in this; "1035 exchange". You will get more information than you need.>>

Thanks for the information. I'll check into it.

KandS2
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