Retirement Planning/IRA CD versus Annuity
You had given me some "traditional IRA rollover" advice on 9/16/13 of which I then visited my bank to try to more understand fixed annuities that you had suggested.
I explained to you that I am elderly & needed some advice in reference to the very low 5 yr. CD IRA rates.
The bank ( Wells Fargo ) did explain & suggested a 5 yr. fixed annuity , paying 2.50 %, can withdraw 10% yr. without penalty.
They use "Western National " ins. co.
This annuity does not have the ability to move any money out without penalty should interest rates rise , of which concerns me at my age.
I would appreciate your thoughts on my going ahead with this transaction, is it reasonable or if you can suggest any other trusted Annuity companies that I can compare with.
I thank you so much as I had not known about annuities, always heard they were a bad investment but now do not agree with this.
Yes, you will hear people say annuities are a bad investment because they don't understand them or they sell a competing product. I think much of what you hear is "one size fits all" advice and there is no one financial product that is right for everyone. I certainly can't think of too many situations where I would recommend a fixed annuity to a 21 year old but in your case it is a very appropriate product. I cannot really recommend a specific product or company because I really do not know what is available in your state and because I don't do business in your state I am not able to access the particulars of the products.
I can tell you this, after checking with a site I use to get annuity rates and basic information, it appears that many companies are doing away with the return of premium feature that I mentioned. Many companies had added this feature because for a while, annuity rates were almost as low as CD's so they needed a way to get some of that business and that was a nice feature. I can also tell you that the products I saw that had that feature had lower rates because they could not pay you a higher rate without knowing that you were going to leave your money in for a certain time period. It looks like some companies are moving away from that feature because they can now offer you a rate of 1% or more higher than a CD.
Where interest rates go in the future is anyone's guess but I can't see any dramatic rises as long as the government keeps printing money. You may want to speak with an independent advisor in your area who can offer you products in your state from various companies. They would be able to match you with the right product.
I would still say that you are most likely better off with the annuity you were offered than the CD. And keep in mind, you don't have to put all your eggs in one basket. Hope this helps!