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Please go easy on me, I'm not an experienced investor....I had $20K from a home sale a few years ago, and my aunt (assistant bank manager) told me to invest it in an annuity. I assumed the money would earn interest and be available for withdrawal when I needed it. I admit I didn't ask a lot of questions -- I just assumed my aunt had my best interests in mind. Now I need the money. The aunt has no idea whether I can get it out. PNC Bank (which sold me the annuity) told me I have to call the life insurance company. I have been doing some googling on this product and can't even find any info on it -- so I have no idea if it's fixed, variable, or what it's all about. It's grown to $23.7K. Anyone have any idea on what this product is or whether this money can be withdrawn? I'm scared to death, because I keep remembering Suze Orman's advice to NOT buy annuities....I can't lose that money! Or, if it's going to be a big tax consequence, should I get a home equity loan instead? I just want to make sure I don't lose the money in that annuity. Thanks in advance!
There are surrender fees most likely . Its in your contract. Typically they run 19-12 years. they usually start at 7-10% and drop around a point a year.
Thanks for the quick response. I talked to Allstate today. It's a fixed annuity with a term of six years. If I close it before 12/2012, I pay surrender fees. I would only pay tax on the gain. It's currently earning 3% and the contract says no less than 3%. It doesn't sound like a bad investment vehicle to me (safe at least), but what do I know.
My dilemma now is whether to just surrender it. Even with the surrender fee, I'd still have more than I put in. Not sure whether that's a better option than taking a home equity loan....guess I'll have to run the numbers.
You may also incur a 10% penalty (IRS not Allstate) if you are under age 59 1/2 (on the income portion)........even though it is not an IRA. Done to encourage the use of annuities for retirement and not for short-term investing.
Yes, thanks for mentioning that...but that won't apply since I'm 61. I suppose I would have to compare what I'll have earned if I keep it to maturity, v. what I'll pay out on a home equity loan in the meantime.
You could take out a loan against it as well but since you are over 59.5 there is no real benefit to doing that. Loans usually get charged 7-10% these days and its not like a 401k loan where the interest paid is credited back to your account. Only reason here to think of a loan is compare the cost of the surrender charge versus interest on a loan. If you were less than a year away the loan might make sense.
Why do you need the cash? Is it for something that you need (pay taxes, mortgage, what) or something that you want? If it's the latter, then let it go.
Do you have enough equity for a reverse mortgage? If your property qualifies for an FHA loan, all that's available now, that's the way to go.
I'd dump the annuity as soon as you can do so without a penalty.
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