I need some annuity advice.

[gailwinters]

My husband has a fixed deferred annuity which matures on Dec. 8 and we need to make a decision on what to do with the money. We don’t need or want to annuitize at this time. Our social security and RMDs pay our expenses. We take some additional withdrawal if we do a special trip or have a large unexpected expense. We have a taxable emergency fund in cash, but 99% of our money is in IRAs and the annuity.

This annuity is non qualified and was purchased under the old rules. We have already withdrawn the initial investment, so every dollar taken now is taxable income for us.

We have looked at some 1035 options and we can transfer to a fixed deferred 7 year term at 3.5%. We could take a distribution of 10% per year with no surrender fees. We would like to get some of this money out of the annuity, but we need to control the tax issue, so our tentative plan is to take a distribution each year and keep it in a taxable cash account. We would also use this money for travel instead of taking withdrawals above our RMDs from our IRAs.

If anyone has an idea about other options that we haven’t considered, we would like to hear about them. If we had it to do over, we would probably have made a different decision about getting into an annuity, but at this point, we seem to be pretty limited in what we can do.

 

[pb4uski]

What tax bracket are you in before any annuity income? How much headrooom do you have to the top of that tax bracket?

What settlement/maturity options are in your contract? What happens if you do nothing?

It might be possible to have the proceeds from the contract be held at interest... essentially held by the insurer and they pay you interest and you can request part of all of the funds at any time... sort of like a savings account... I'm just not sure if it is possible to do so within the tax-deferred umbrella... talk with your agent or the insurer.

 

[alaska55]

I wouldn't take advice from anybody on annuities on this board, you want good info call Vanguard.

 

[gailwinters]

Talking to Vanguard is a good idea. Thanks for the responses.

 

[imoldernu]

Same situation...DW small annuity
Cost $8K current total value $61K. 10%/yr, or surrender Value $54K.

Has changed hands 3 times since purchase

We don't need the cash, but I don't know what happens to the balance, if it's not taken out. Interest rate 4%.

Agent died 30+ years ago.

 

[pb4uski]

The issuing company should be able to tell you what happens if it's not taken out. Try calling them.

 

[loganbailey]

There are deferred fixed annuities that have significantly reduced surrender schedules, (e.g giving up accrued interest rather than an initial 9-10% surrender year one) . There are also deferred fixed annuities that can have 25% free withdrawal rates.

Brokers don't mention these though, because they don't pay hardly anything to sell.

Anyways, that's what you should look for. Hope this helps.

-Insurance is my jam.

 

[imoldernu]

There are deferred fixed annuities that have significantly reduced surrender schedules, (e.g giving up accrued interest rather than an initial 9-10% surrender year one) . There are also deferred fixed annuities that can have 25% free withdrawal rates.

Brokers don't mention these though, because they don't pay hardly anything to sell.

Anyways, that's what you should look for. Hope this helps.

-Insurance is my jam.

Thanks... Appreciate the comeback!

Since I had no idea how the system worked, I went to the NAIC (National Association of Insurance Commissioners) website, and read through the 12 pages of intense information and questions guide. Based on this, I guess I'll have to break down and get a FA, 'cuz it's waaay over my head. Calling the company that now holds the annuity is fruitless, as the reps who answer the phones can only answer questions that I don't know how to ask.
ie. survivor benefits,tax issues, withdrawal options and termination issues etc..
Too many details for me. Guess it's time to get some help, anyway. Update the will, and review all the rest of our finances. Don't want to leave a mess for the kids to clean up, when it's time to go.