Expert: Dr. Joseph de Beauchamp - 6/28/2005

Question
Dear Dr. Joe
I am a retired autoworker living on a pension. I am 53. Before I retired I managed to save a few dollars in a 401k. As of today it's only worth 56,000, but it's all I have saved. Here is my delema, an insurance agent suggested that I rollover all of it into a Phoenix Annuity. I have been trying to read up on annuities and still don't know what to do. Right now my money is parked in Fidelity Investments and split between 3 mutual funds, Ford stock and a bond fund. The real loser so far in all of them is the Ford stock. What are your thoughts on variable annuities?
Thanks,
Hector


Answer
Hector,

Fidelity has good diversified funds. An International fund of theirs would be good to stay the ups and downs. I am not certain that bond funds make sense now, with rates going up. I would shift into a good international stock and bonds fund with Fidelity.

Annuities carry the same risk in the variable nature of the stock markets. I have never found them to perform better than the mutual funds that they hold. Annuities that are fixed, with no market risk, and provide a good yield  ---these are a consideration. Fixed annuities can pay up to 7% current rate for now, and will not change value due to the market. I actually prefer a fixed annuity now to even mutual funds. I see the markets becoming choppy over the next ten years or more. So, first choice would be an annuity, but only a fixed rate annuity.

Dr. Joseph de Beauchamp