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<<My father is 58 years old and was forced into early retirement. He has a 401k plan and company (utility) stocks. Unfortunately he has always invested safely and so does not have a huge nest egg. He is talking about moving his money into an annuity. I know that this is not a good idea, but don't know enough to show him why. I need to know more about annuities!! I am a new fool and this is my first post. All help would be appreciated! Thanks- Wendy >>

Annuities are similar to mutual funds with higher expenses. Money accumulated in an annuity is taxed as ordinary income (39.6%) vs. 20% for capital gains. The Wall St. Journal has been running a series of articles in the last six months about how bad annuities are and how hard it has become to sell them. Other than annuity salesmen no one seems particularly positive. It sounds like your father may have invested very conservatively and he probably wouldn't want to jump right into picking stocks. The services of a fee only financial planner might be worthwhile. A young retiree needs growth to maintain the purchasing power of his savings. Avoid insurance salesmen who are also fiinancial planners, they have a reputation for being overly fond of selling annuities and insurance (which happens to geneate comissions.)
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