Should I exchange my acquired funds or annuitize?

My advisor told me to purchase a NQ Variable Annuity in 2008 for $100,000. They recently moved all my finances, except for the annuity, to "fee only" due to high fees. Nine years after the purchase, it has reached $135,000. I am retired and need money. My new advisor says to take $4,000 a month from the annuity. I am in the 25% tax bracket so it will cost $1,000 each time I withdraw. I am feeling crazy and confused. I read about annuitizing, but I am not sure if I get it. The surrender period is on June 2018. The surrender fee is around $2,000. I am 62 years old and they want me to wait until I'm 65 years old. In those three years, I will have paid them about $1,500 in fees (that I'm aware of). Maybe I should get a home equity loan? I have lots of remodeling and repairs going on right now!

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September 2017

You have a lot going on and I can't answer all of your questions, but I wanted to address your calculation on the taxes you'd owe monthly on the annuity payout.  If it's a non-qualified annuity (meaning you didn't purchase it with IRA or 401(k) money), you only owe taxes on the profit the account has made, or the $35,000.  Generally, the distributions are taxed on a pro-rata basis.  For example, you have made 35% on the investment, so only 35% of the $4,000 contribution would be considerd taxable.  So that's $1,400 profit taxed at 25% would be $350 owed in taxes for each $4,000 withdrawal.   So, not so bad as you thought.

You would want to verify this with at CPA (I am NOT one).

Hope that helps!

September 2017
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September 2017