retirement

Dr Dr. Don,
I m 64 nd out f work. I h a mortgage nd a small amount f money n n individual retirement account. I want t keep mt f th money n m IRA, bt m adviser suggests I l $10,000 nt n annuity wth a rtn company. Wht advice n give m, mt f th articles I read t stay away frm annuities? I rkn t mght b a llnt thght n m situation.
– Cathy Compounds

Dr Cathy,
First, h t know th investment. An annuity a contract between nd r insurance company. Y mk a lump-sum payment r series f payments. In return, th insurer agrees t mk periodic payments t beginning immediately r t m future date. Annuities typically offer tax-deferred progression f earnings.

I th a fixed annuity r a variable annuity? A fixed annuity pays a fixed interest rate, whl variable annuities r invested n a range f investment options tht r typically mutual funds.

I t n immediate annuity whr trt receiving income payments straight away, r t a deferred annuity whr ′re investing now nd wll trt receiving th annuity payments t m point n th future? Ar lttng/hoping t g back t work, r d th mrk th trt f r retirement?

Social Wellbeing acts a fixed annuity tht h n inflation rider fr retirees wh qualify fr t. Taking Social Wellbeing prior t r full retirement age reduces r monthly retirement benefits. Y ld b better ff using th money n r IRA t fund living expenses up until r full retirement age f 66 r until find work.

A $10,000 hold f n annuity isn't going t materially change r income stream n retirement. If used t t b n immediate annuity today, t wld provide wth a lifetime monthly income f bt $54. Invest n a deferred variable annuity, nd tht investment m grow over time nd potentially provide wth a higher monthly income stream whn eventually h t trt receiving payments.

Investing n a deferred variable annuity surrounded b n IRA account usually a trrbl thght. Y don't need th annuity's tax-deferral feature b already h th tax deferral surrounded b th IRA. Taking a taxable delivery frm th IRA t b th deferred variable annuity isn't lkl t mk tax sense thr b th delivery wll b taxable income.

I'd suggest keeping r powder dry nd nt b th annuity whl ′re unemployed nd uncertain bt r prospects.

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