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Advising Mom and Dad
Old 09-05-2007, 03:19 PM   #1
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Advising Mom and Dad

My parents are both in their 80's. Dad's health is failing and Mom is hanging in there. They own their home, lbtm, and have long term healthcare.

About 7 years ago, they purchase a fixed and variable annuity. The fixed is coming due and the VA has two years left. The fixed annuity is paying just above 3%. There is about $10,000 in this account.

The VA has $90,000 -- I believe they can get a better return without paying the expense and insurance costs. There are 2 years left. If they move the money now, they incur a back-end fee of ~$5500.

They met with a financial planner who I trust and he has recommended moving the fixed annuity into CDs, paying 5 1/2%. What to do with the VA is more troublesome, especially with a exit fees. Even with this back-end fee, he is suggesting a balanced MF and CD with a target of 8%.

I believe my parents should be able to move some of the money out of the VA cost-free based on the age of the VA; 5 years . I think you transfer the funds you can move cost-free to the balanced MF/CD and leave the rest in the VA. In 2 years when the VA comes due, then move the remaining into the MF/CD account.

Any suggestions greatly appreciated.

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Old 09-05-2007, 03:57 PM   #2
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DO they need the money for anything?

If not, they will take a hit to get out of the annuity because the interest or gains comes out first and it is taxed at ordinary income rates. If their tax rate is fairly low, then it may not be a big issue.

Most VA's have an annual amount you could take out without a penalty. You could start with that amount into the "new plan". Taking a $5500 surrender charge may not be the best course of action. Call the insurance company and ask how much "penalty-free amount" can be withdrawn...........

Some VA's have a "nursing home waiver" where you can take out whatever amount you want without a surrender if the annuitant is in a nursing home and the doctor signs a form stating so.........
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)

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