I am 40 yrs old. At 23 yrs old I received a pay out of life insurance. I was advised at that time to put money into an annuity. It is a variable annuity that grows at simple interest rate of 6% annually.
Now that I’ve been learning from Personal Finance Club, I question whether this is the right place to leave that money. Would you recommend I leave it there? Or transfer the funds into a TDIF?
Thank you!
I’m not sure about this one exactly. On what little I know I would cash out and put it in a TDIF.
@ShaneSideris can better explain why.
I am assuming these are in an annuity in a non qualified account (since life insurance benefit).
That said 6% simple interest is not the worst thing in the world. That 6% amount may be a “living benefit” which means the amount you can turn to income (vs amount your can take as lump sum.
You will have to pay taxes and 10% penalty if you liquidate the annuity pre 59.5. You can roll over that annuity into another annuity that may have some more modern crediting (growth) and lower fees,
If this isnt a major part of your investable net worth it might make sense to hold. Its like a bond at this point, and you wont find any of those with zero downside risk and 6% income…
Tim
Hi @velolena!
I agree with @lhun090. Yes, normally, for someone that is young such as yourself, a target date index fund would make the most sense. Since you already have the annuity, it probably wouldn’t make sense to liquidate it and pay the taxes, penalties and fees. A 6% variable annuity is higher than what I normally see.
I think the best route would be to direct all future investment dollars to low cost index funds!