Expert: Paul Henneman - 2/18/2005

Question
After my father past-away in March of 2002, my sister (trustee) proceeded to invest $55,000 of my share in a Met-Life annuity without any kind of input from myself...to make a long story short, we have now had that investment transfered as part of my trust settlement and I am wondering about your opinion on annuities, and there will be a penalty on early with-drawel...should I want to invest in something else. I would appreciate your advice...Thanks

Answer
George,
  Thank you for your email!
  Unfortunately I think that you are in a difficult spot. Yes, I believe that there will be penalties if you withdraw from the annuity. However, a Met-Life Annuity is not a good place for your money. It really is more of a life insurance type plan than a real investment. There will be very, very low returns on this sort of investment. Annuities in general can be a good investment for part of your money. I specifically have had bad experiences with MetLife. I won't go into it here, but if my experience hold true then they misrepresented the entire process to your sister. You may be in a difficult spot because of it.
  The question is how to proceed? I would contact Met-Life and find out exactly how much is there, and what it would cost you to get it out. A far more appropriate place to 'park' money while you decide what to do with it is a money market account. This works almost exactly like a savings account, and does earn you a small amount of interest, perhaps 2% a year. Unlike an annuity, you can access the funds whenever you want with no penalty. Most money markets can give you checks to write just like a checking account, and provide a card to withdraw from ATM's as well. My money market account of choice is www.NetBank.com, it is FDIC insured by the goverment up to $100,000 (very important), and has a high interest rate return for this type of account, and almost no fees.
  Once you find out the exact penalties for withdrawl from the annuity, you will have to decide if this penalty is too high and forces you to remain with the annuity, or if it is something you can live with. If you can live with it, get it out and into the money market.
  If interested, I would be happy to answer any questions regarding more appropriate ways to invest your funds after you resolve this first problem. Just follow up with me at any time. I am at your service!

Sincerely,
Paul Henneman
President
ValuEngine, Inc.
www.ValuEngine.com
www.VEInstitutional.com
www.VEReports.com