Help with Security Death Benefit

[OrangeBandit]

My mom,73 years old, has this Annuity that shows the account value at $49,254. The "Current Cash Surrender Value" is $46,241, these #'s were from her statement on Dec 31, 2018. Now she has gotten a letter from Security Benefit that states:
"An allocation in your annuity contract's 5-year Guarantee Period Year Guarantee Period will reach the end of its Withdrawal Charge period on March 5, 2019. The accumulated value of this allocation is $14,173 as of Jan. 31,2019 earning a rate of 2% and you may choose from one of the allocation options below:
Option 1: Reallocate entire amount in the 1 year renewal Guarantee Period,
free from Withdrawal Charges, can be taken any time.
Option 2: Take no action, reallocate entire amount in the current 5 year
Guarantee Period and will have Withdrawal Charges.
Option 3: Reallocate in accordance with specific instruction 1 thru 10 year
Guarantee with Withdrawal Charges.

I guess my question here is "What amount are we supposed to be deciding what to "reallocate", just the $14,173? I'm thinking this is correct but why only $14,173? It seems we would be reallocating the ENTIRE balance of $49,254. I'm thinking at her age she should do Option 1 and be withdrawing the 10% of the Contract Value, free of charges. Otherwise if she does Option 2 and 3 and she will have to pay a 7% surrender charge.

Forgive me if this seems long-winded but this is all new to me and I'm trying to understand it and guide my mom in the correct direction. We haven't had much luck in talking to anyone in person from Security Benefit.
Any advice will be much appreciated!!

[athena53]

OK, I'm gonna go out on a limb here because I'm a retired property/casualty actuary and I know just enough about life insurance and annuities to be dangerous. Maybe someone with more expertise will chime in, or at least you can better focus your questions to the people at Security Benefit.

The Guarantee Period refers to the time interval in which they'll pay regardless of whether or not your mother is still alive. It's not clear when that starts- did she buy the annuity 5 years ago? Typically, if you buy an annuity with a 5- year Guarantee Period, you or your heirs are guaranteed at least a total of 60 monthly payments.

OK- the "allocation" bit- looks like they have the annuity divided into allocations (think of them as "buckets") and the amount in each must stay in that bucket for a certain period of time or else you pay withdrawal charges. They've now freed up $14,173 in one of those buckets.

You can tell them to put it in the portion of the fund that's guaranteed to be paid out over the next year regardless of whether or not she's alive, with no charge.

You can tell them to put it in the portion of the fund that's guaranteed to be paid out over 5 years but there's a penalty.

I lack the expertise to tell you what kind of "custom" instructions you could give them.

Is there any way you can possibly contact the agent who sold her this annuity? They should be able to give you answers. Whatever you do, DO NOT let them cash it out and put it into some product they tell you is better. There will undoubtedly be generous commissions to the sales person and it will come out of the surrender value.

Annuities scare the crap out of me, and I actually understand mortality tables and compound interest.

[badatmath]

Quote:

Originally Posted by athena53 Annuities scare the crap out of me, and I actually understand mortality tables and compound interest.

Good reminder for me cause they scare the crap out of me too even though as i get older I can feel myself having more desire for "security".

[OrangeBandit]

Thanks Athena, that helps clear the muddy water a little! She started this annuity back in 2012. We will try AGAIN to contact the person who sold her on this and see what he recommends, if you can trust them.....