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Q: My grandma said she had an annuity for my mother and other 4 sibling to inherit.
My mother passed and my grandma said she wanted my mothers portion split between me and my two sisters.
What happens if she passed before getting our social security numbers how does this work?
The insurance company does not technically need a Social Security number for a person to be listed as a beneficiary on an annuity contract (it's not an annuity requirement). All that should be needed is a "Change of Beneficiary form" that would list beneficiaries as 20% to each of your aunt/uncles and 6.6667% to you and your two sisters. If your grandmother is still alive and the annuity owner all she needs to do is contact the annuity company, get the Change form, and mail it back to the annuity company.
Q: Does the FDIC issue good
standing or status certificates for banks and,
if so, how do I obtain one?
A bank either is part of FDIC or they are not. All banks with national in their name must be members, state chartered banks may choose not to be - but I haven't seen a non-member in years. If you are looking for a way to judge the financial condition of a bank I would suggest using
Q: Does the state guaranty association relate to the state the insurer is in, or the state where the buyer resides?
If the insurer fails and the state guaranty fund is activated, payment is made by the association of the state where the annuityowner lives at time of the failure.
The exception is if the annuityowner bought the annuity in one state and then moved to a state where the insurer didn't offer the annuity, then the state association where the insurer is located would pay out. As mentioned elsewhere, you should always contact your state association for your personal situation.
Q: 1) What is the best way to determine the financial strength of an insurance company?
2) Are some ratings better than others?
3) How would you determine whether the insurance company was safe?
Unless you are comfortable with balance sheets and mortality reserves you will have to rely on what others say. There are a handful of independent rating services that evaluate the ability of insurers to meet their obligations. Ratings in the top three categories (the A or better ratings)are regarded as good to excellent.
Since I don't have a crystal ball I rely on rating services and I look for consistent ratings. And although annuity carriers do have a very good record of safety, because I don't have a crystal ball I would diversify amoung financially strong insurers.
Q: When you deposit an out of state check to your checking account, how long before the check clears the payer's account? When do the funds become available to you? Are banks responsible for notifying the depositor if a check bounces or must you wait for a bank monthly statement to learn of the problem?
Federal Reserve Regulation CC (12 CFR Part 229) limits the amount of time that banks and credit unions may deny you access to your deposit. It was passed to stop bank abuses where checking account deposits were not made available on a reasonable basis. By the next business day the bank must allow you to withdraw ALL: cash and electronic payments, cashier’s checks, all government checks, checks drawn from the same local bank and U.S. Postal money orders. Checks drawn on local area banks must be made available no later than the second business day. Nonlocal checks must be made available no later than the fifth business day.
Exceptions: This used to be pretty straight forward, but with banks looking for ways to replace lost profits some has been abusing the “6 exception rule” of the guidelines. The exception exists when the bank doubts the deposit is good. They can apply the exception to new accounts, overdrawn accounts, emergency conditions (natural disaster and such) and where a bounced check is redeposited.
However, they can also delay if you deposit more than $5,000 in one day or if they have “reasonable cause” to doubt the deposit is good; then they can tie-up the money for up to 11 days. However, the burden is on the bank or credit union to show why they thought the deposit was uncollectable.
If the bank invokes a “reasonable cause” exception they are required to inform you – in writing at the time of the deposit. If not, and your checks bounce because the deposit was not allowed, the bank CANNOT charge you any overdraft or returned check fess. How the bank notifies you if a check you deposited bounces must be spelled out in their funds availability information.
Q: I'm 65. My annuity will be worth about $250,000 when I am 70. I'm thinking of annuitizing it at that point, with payments going to my daughter who will be about 40 at that time. About how much could I expect the monthly payments to be for her?
The Ohlson Group for an idea of what someone might get today if they purchased an income annuity for $250,000. Their answers depended on how it was structured. For example a 70 year old could get a guaranteed monthly income of $1442 for 20 years or life – whichever last longer. Or you could get a monthly income of $1008 for as long as either you or your daughter live – which means it could still be paying your daughter 50 years from now. And there are many other options.
Your existing annuity has a guaranteed annuitization income table that can tell you exactly what the minimum income is you would receive in 5 years. With 5 years to go it’s even possible that an annuity with a guaranteed lifetime income benefit might be attractive for your goals. Depending on when you purchased your current annuity the income from a new annuity could be higher or lower than the income you’d get if you swapped your old annuity for a new annuity.
Q: Is the only reason insurance companies and insurance agents are prohibited by law from discussing their state guaranty associations is because of inducement? Meaning the guaranty funds should not be a substitute for selecting an insurance company?
Your second sentence could almost have been taken directly from the language of many state regs governing guaranty funds. Every state reg I've read says you can't use the guaranty fund as a reason (inducement) to buy an annuity and a few even prohibit agents from mentioning it as well.
The state guaranty funds are a safety net that protect at least $100,000 in annuity cash value in every state if the carrier goes bust, but it relies on assessments on other insurers which means it can take awhile, sometimes years, before a covered annuityowner is made whole. This means a consumer needs to feel comfortable about the financial strength of their carrier.
Q: As I understand it, FDIC guarantees the money to the bank...not you the depositor. This is a very well kept secret that most don't know or understand.
FDIC insures individual accounts for up to $250,000. If a bank fails in almost every case FDIC finds another bank to accept the deposits of the failed bank and insured deposits are immediately available to the depositor at the new bank. In those rare cases where a bank cannot be found to accept the deposits the FDIC will pay the depositor directly by check up to the insured balance in each account. Such payments usually begin within a few days after the bank closing.
The insured money is guaranteed by FDIC to the depositor and not the bank. This is not a secret and is discussed on
Q: Do fraternal
benefit societies that sell life insurance to
their members have any guarantee beyond the
solvency of the individual fraternal benefit
society? Have any of these fraternal
benefit societies failed and what happens if and
when they do. Since each State is different, I
live in New York.
In every state I've looked at fraternal
policies are backed by the fraternal and
nothing else. Fraternals have failed in the
past, but it's been so long I can't recall
To know for sure whether your carrier is
covered by the guaranty fund you need to
check with your state insurance department.
In New York you can search
here for covered carriers.
Q: Should I put my $450k into an annuity? I'm
getting some money, what should I do with it?
Our mutual funds and other investments have
dropped 20%, please advise.
Answer 1: I can't answer "should I" or
"which" questions. To a large extent the
correct answer depends on a person's
goals, risk tolerance, personality and
total assets. This is why you need to
sit down with someone you trust - or
preferably 2 or 3 different people - and
ask for their suggestions and reasons
why. And second, we don't give
I can offer two generalities
that usually hold true:
Diversify: Don't put all your
money into one place or one type of
It's A Circle: Times are bad now,
they could definitely get worse, but if
you believe the long-term outlook for
the economy is positive then you should
not react to short-term spookiness,
provided you have the wherewithal to
ride out the bad times.
Q: Is my money market FDIC insured?
We are getting quite a few
questions along these lines about
individual money market issuers. In
general, money market accounts
are issued by banks and are covered by
FDIC insurance limits, money market
funds or notes are securities
and are not covered by FDIC insurance.
The same holds true for mutual funds,
annuities, and U.S government bonds -
these are not FDIC insured because they
are not issued by commercial banks.
Answer 2: This link to the FDIC
allows you to type in the name of the
issuer and you will get a list of FDIC
insured banks meeting your description.
Try to be specific (for example if you
are looking for Cat Bank your answer
list will contain every bank with 'cat'
in its name).
Q: Can I cash in a savings bond where my
Dad's the owner and I'm the beneficiary, but
Dad's still alive?
Q: I heard FDIC can take 90 years to return
your money...If I am over FDIC limits is there
one place 100% safe?
First, everybody needs to take
a deep breath. It is a lousy financial
market, within the last year 7 banks
have failed - more than failed in the
preceding 3 years, IndyMac will cost the
FDIC fund $4 to $8 billion dollars, and
I believe more banks will fail. But
there are 8534 banks that have not
failed, after IndyMac there should still
be over $45 billion in the fund, and
FDIC has the right to borrow unlimited
funds from the U.S. Treasury.
there is no time limit on how long it
can take FDIC to reimburse insured
depositors of a failed bank, the insured
deposits are typically available the
next business day at a new bank FDIC has
arranged to handle the accounts
and even the dead bankÃ¢â‚¬â„¢s ATM cards will
still work the next day at the new bank.
Answer 2: If you are over FDIC limits
you are treated as a creditor of the
bank. In the last decade uninsured
depositors have received back 50% to
100% of the uninsured deposits - but
they always got 100% of insured
deposits. One way to be safe is to
ensure all of your bank deposits are
fully FDIC insured, even if it takes
accounts at multiple banks.
Another alternative is to use a
single bank that offers CDARS. CDARS can
essentially provide up to $50 million of
FDIC insurance on ONE account. For more
information check out the CDARS web site
Q: How safe is my bank, what is it rated, and
are all my CDs covered by FDIC?
We are getting some questions
about bank safety. The last question
should really be asked at your bank.
FDIC covers bank deposits up to $250,000
for one owner at one bank, but husband,
wife, and joint account would be covered
for $250,000 for each name or $750,000.
You should talk to your bank folks about
how to maximize FDIC coverage.
Altho FDIC does not rate the
financial strength of banks there are
rating agencies that do. A link to these
rating agencies web site is in the
How Safe Are They section.
This agency provides ratings on
individual banks if you fill in the name
Answer 2: There have been some bank
failures in 2008 and there well may be
more - the mortgage debacle was painful.
It is important to know your bank is
It is also important to remember that
in the 70 plus years that it has been
around that no FDIC insured account
owner has lost a dime because the bank
failed. The banking system is still
Q: Where can I get a good safe rate?
The problem is interest
rates are down and pockets are getting
pinched. You could always try risk money
places to get a higher yield, but higher
returns often mean greater risk of loss.
And altho interest rates have trended
down over the last 20 years, if the
cycle repeats rates could start going
back at some point in the future so one
may want to preserve some flexibility.
Yield Ladders using certificates of
deposit takes the guesswork out of
predicting rates. If inflation becomes a
I Bonds might be considered because
the yield is directly linked to changes
in the Consumer Price Index, but if
inflation retreats I Bonds yields would
also go down. Series EE Savings Bond
lock in a low 1.3% interest rate for 20
years and can be beaten by almost
anyone. Or you could find a bank money
market account and try to ride out the
Answer 2: There are
multiyear fixed annuities that will
lock in an interest rate for 2 to 10
years and many of these are competitive
with bank rates - the penalty periods
tend to match the length of the
guarantee. There are also fixed index
annuities that provide the potential for
significantly higher yields than current
bank rates - if the index cooperates -
but if the index goes down you could
earn zero for the period. You need to be
sure the liquidity provisions of the
annuity meet your liquidity needs.
The real answer is you may not be able to get what you might consider a
"good" safe rate today because rates are
lower. However, this is probably a good
time to evaluate what you want your safe
money to do for you and then find the
combination of places that best meets
Q: If I have 5 $100,000 deferred annuities
with 5 different insurers, do I really have an
aggregate of $500,000 insurance through my
Maryland Guaranty Association?
Update: Effective 1 October
2010 the annuity present value maximum
goes to $250,000 on one life.
the answer to the question above is
you'd only have $250,000 in guaranty
fund on your $500,000 in annuities (and
really bad picking if they all failed).
Q: I have
a 5-year CD valued at 1,000,000 with an Annual
Percentage Yield of 4.3% over 5 years. I have
had it for 2.5 years and would like to withdraw
all the money, would I be penalized for this
Probably, but only the bank
knows how much. Altho the typical
penalty for getting out of a CD early is
the loss of 6 months interest - which
could be 2.15% or $21,500 in your
instance - the penalty may be as low as
7 days interest or as a long as a year's
worth. The bank can tell you what the
exact penalty is.
Answer 2: Unless you have a "brokered
CD". These are often purchased thru
stockbrokers and often cannot be cashed
in early but must be sold, in which case
you would receive the market value.
Q: What penalties will I incur if I withdraw
$10,000 from my annuity?
Your annuity contract will
tell you. If you are past the early
withdrawal penalty period no withdrawals
would be subject to charges (this does
not include two-tier annuities which can
have withdrawal conditions for the life
of the contract). Most annuities permit
you to take out 10% per year of the
total value without charges, so if the
annuity value was over $100,000 the
$10,000 withdrawal would be
penalty-free. Some annuities allow
unused annual penalty free-withdrawal
periods to add up (if you don't withdraw
10% this year you may withdraw 20% next
Answer 2: Your annuity agreement will
tell you how much you may withdraw and
what any penalties may be. You could
also call the insurance company and ask
them. You should be aware we are only
talking about insurance carrier
penalties, tax considerations are
another matter and you should talk to
your tax advisor about your personal
Q: Would I get a
higher return if I took out the balance of a
fixed annuity as a lump sum or annuitized it and
received monthly payments over a period of
Answer 1: Assuming you do not have a need
for the entire balance today it would
depend on which was higher - the yield
you would earn on the annuitized
payments or what you could earn on the
lump sum. Another factor is taxes.
Interest earned in an annuity is taxed
when received. In a lump sum all the
interest would be taxable at once, but
if it is annuitized the taxable interest
is spread over the periods. If the
annuity is properly exchanged for a new
one and no money is withdrawn, taxes are
not due at that time.
Answer 2: Often the effective interest
rate today on period certain payouts -
which is what you are taking about -
ranges from 2% to 4%. To determine the
yield you would earn you need to know
the monthly payment (PMT), the principal
amount (PV), and the number of months
(n). And then use a financial calculator
to find the interest (i).
Q: If a certificate of deposit is listed with
both mother and daughter on it how is it treated
if one passes away?
Answer 1: Wikipedia says a joint
tenancy with right of survivorship or
JTWROS is where the joint owners
have a right of survivorship,
meaning that if one owner dies, that
owner's interest in the property will
automatically pass to the remaining
owner or owners.
Answer 2: The bank can set up
ownership of the account to meet your
wishes. And since we do not give legal
advice your attorney can provide the
Q: What is a surrender period?
Answer 1: A surrender period is a
deferred annuity term for the time in
which a penalty is imposed if you
withdraw your money. A very few
annuities have no surrender period - you
may withdraw all of your money at
anytime without charge. A very few
annuities have a surrender penalty that
lasts forever - the only way to avoid
penalties to is to take the value out
over time (annuitize the annuity). The
vast majority of annuities have a
surrender period lasting 5 to 10 years.
Answer 2: The vast majority of
deferred annuities permit you to take
out 10% of the value each year without
penalty (altho the IRS gets involved
with the interest received). Other safe
money places with surrender periods are
Savings Bonds - 5 years, and
certificates of deposit - where it is
known as a penalty for early
Q: If I have an
FDIC insured account and the bank goes bust when
can I expect to receive my money?
Answer 1: In every situation I looked
at your money was immediately available
in the new bank that the FDIC had
persuaded to take over the accounts of
the failed bank.
Answer 2: This was only true if your
account was fully covered by FDIC. If
your account was over FDIC limits the
excess money is treated as if it were a
debt to the bank, and you will receive
money as bank assets are sold. This
process can take years and often results
in getting back less than 100 cents on
the dollar (but only on the uninsured
Q: I have $220,000
to put into an index annuity, would this yield
$1,200 a month?
Answer 1: Receiving $1,200 and leaving
the $220,000 intact would require an
annual yield of 6.55%. If you earned 6%
the money would last for 43 years, if
you earned 5% the money would last 30
years, and if you earned 4% the money
would last 25 years.
Could an index annuity earn 4%, 5%,
or even 6.55% over time? For that
matter, could any financial instrument
earn these rates over an unpredictable
future? Maybe, maybe not.
Because of this uncertainty
more and more index annuities are
offering something called Guaranteed
Lifetime Withdrawal Benefits or
GLWBs. What a GLWB does is the insurance
carrier guarantees that you will receive
at least a specific percentage payout
for as long as you live even if the
money runs, but unlike annuitization, it
still gives you access to your money.
For example, an index annuity with a
GLWB might guarantee a withdrawal rate
of 6% a year. Say the index annuity did
poorly and your account ran out of money
- the annuity company would continue to
pay 6% a year until death. Say the index
annuity did well and earned over 6% a
year - either you or your heirs would
GLWBs are the story in the
Q: Is an IRA
multi-account rule better than a trust? What do
you think is the true rate of US inflation? I am
58, does using some IRA money to buy an
immediate annuity make sense?
Answer 1: We get a lot of questions
like the ones above, but we don't feel
comfortable answering them. The first
question is asking legal advice, and
we're not lawyers. I'm not sure if the
second question is asking what is the
inflation rate - which is available at
http://www.bls.gov/cpi - or a
philosophical question on inflation, but
we don't do philosophy. We consider that
the third question is asking for
investment advice, and we don't give
that out either.
Answer 2: We try to answer "how",
"what" and "why" questions, as in "how
does it work, what does it do and why
might someone do it".
The reason why someone might purchase
a fixed immediate annuity for life is to
establish a regular income that will not
run out due to market losses or how long
you live. This income could be a
baseline to help ensure that basic needs
are always covered. The major negatives
in selecting an income annuity are
usually that the income stays the same
and does not increase with inflation and
that when you die the income stops and
the money is gone. However, there are
types of immediate annuities that can
increase future income and ensure that
you get back at least what you put in.
Do they make sense for your
particular situation? We don't know,
which is why you need to talk with
someone that can look at your whole
Q: Does the company
holding my annuity keep any that is left in it
upon my death?
Answer 1: In a deferred
annuity, no. The insurance company pays
the annuity balance to the named
beneficiary. If the annuity is an
immediate annuity (also known as an
income annuity) where a person has
annuitized and is receiving regular
payments the payments usually stop upon
death; the two exceptions are a
period certain annuity that will
continue to make payments until the
period is over, and an installment
refund immediate annuity that
promises that if the payments already
made do not equal the original premium
the insurer will cut a check for the
balance and effectively ensure that 100%
of the premium is paid out.
Answer 2: I'll repeat that. In a
regular deferred annuity the
annuity balance is paid out in full
to the beneficiary. The only exceptions
are the handful - and I mean a very few
- annuity companies that will charge a
surrender charge upon a death.
The California Insurance
Department released an annuity
report that says "in
a fixed annuity the amount remaining in
the annuity at the annuitant's death
stays with the insurance company."
This is WRONG
- it would only be true if you chose the
most restrictive annuitization payout
insurance company DOES NOT KEEP YOUR
MONEY IF YOU DIE when you own
a deferred fixed annuity. We hope
California fixes this incredible
Q: Is it true that
a "fixed index annuity" is protected and
guaranteed through a state guaranty association?
Answer 1: Yes, to fund limits.
Answer 2: Here is the
Q: How may a death
in a family affect FDIC insurance coverage of
bank accounts for which the deceased was a
co-owner or beneficiary?
Answer 1: The FDIC Guide Your Insured
Deposits says FDIC insures a
deceased person's accounts as if they
were still alive for another six months.
So, a regular joint account that was
insured for $500,000 would drop to
$250,000 in insurance six months after
the death of one of the joint owners.
Answer 2: There is no grace period if
a beneficiary (or all beneficiaries) of
a POD account or most revocable trusts
passes away. If you have specific
questions, you should talk with the
people at your local bank.
Q: I have $300,000
in a qualified IRA, 2 years remaining before no
penalty. With $12,000 penalty if withdrawn now,
and a 10% bonus on remaining $'s, is it
advantageous to choose a fixed index annuity
that requires 17 yr commitment. I'm 68.
Answer 1: The real question is, in
connection with your other resources do
you feel you would have enough liquidity
to meet your needs? Although most
annuities allow penalty-free withdrawals
of 10% of the value each year and many
waive liquidity penalties upon a death
or if long-term nursing care is
required, only you can decide the degree
of liquidity that is needed.
Answer 2: One should remember that an
upfront bonus is essentially prepaid
interest and is not "extra" money. If
you have two identical annuities and one
offers a 10% upfront bonus and the other
doesn't, the non-bonus annuity should
pay higher interest in future years than
the bonus annuity until the money from
the bonus is recaptured.
Q: If I were to put
$80,000 into a short term, three month CD, how
interest would I earn on that? Assuming the APR
Answer 1: You'd earn $2,073.26 in
interest (if the interest is compounded
Answer 2: An "APR" rate is the same as a
compounded rate. A nominal rate is the
simple interest or not-compounded rate.
A nominal rate of 5.15% becomes an APR
rate of 5.25% if it's compounded
To calculate this you divide the
nominal rate by 4 (since we're using
quarterly compounding) so 5.15%/4 =
1.2875%. In 3 months you'd earn 1.2875%
interest you'd earn 2.5916% (1.012875 x
1.012875) and in a year you'd earn 5.25%
in interest (1.012875 x 1.012875 x
1.012875 x 1.012875)
Q: It is my
understanding fixed annuities are not covered by
the SEC, does any agency have oversight over the
Answer 1: The insurance departments of
50 states, 3 territories, 1 commonwealth
and 1 district regulate the insurance
companies selling annuities in their
neck of the woods. They look at the
policies, the customer materials, the
financials of the company and decide
whether they will permit the company to
do business with their citizens.
Answer 2: In addition to reviewing
forms and product filings, insurance
departments regularly visit insurance
companies and spend days looking over
what the insurers do and how they treat
consumers. If you'd like to learn more
the web site
www.naic.org provides information on
Q: Is a deferred
annuity practical for applicants over 65 years
Answer 1: Of course!
Answer 2: A good question is what are
your goals? A fixed deferred annuity
allows interest to grow on a
tax-advantaged basis. Unlike bank
interest, the interest compounding in
the annuity is not subject to current
income taxes and will not contribute to
Social Security Benefit taxation.
Although income taxes will ultimately be
paid when the annuity interest is
withdrawn, any taxes not paid on your
Social Security benefits may never be
Annuities have withdrawal penalties
that vary in length and severity,
although most annuities let you access
at least the annual interest
penalty-free. This means you should make
sure your liquidity needs match the
liquidity offered by the annuity.
Annuities are a safe money place
paying competitive interest rates,
guaranteeing a minimum return, and offer
a wide range of liquidity choices. Why
wouldn't one be practical for those age
Q: Are index
annuities safe - what should we look for in a
good company - are local investing groups
usually okay to use?
Answer 1: I consider index annuities to
be a safe money place because both
principal and earned interest are
protected from market risk, and to date
no one has lost a dime because an index
annuity carrier went bust.
I would look for a company that was
financially strong and there are a list
of companies that rate insurers
Answer 2: I would also ask the insurer
for a record of how previous index
annuity owners have been treated - what
interest have owners actually earned
since they've owned the annuity.
Good financial counselors may be
found everywhere. Ask friends for
referrals (and ask the counselor for the
names of a few clients you can talk
Q: The website
called "CD InterestRate Scorecard" shows banks
CD's with interest rates at above 5%. Are these
CD's safe and if yes, for what period of years
would it be "good" to purchase these CD's?
Answer 1: If by safe you mean are they
FDIC insured you can go to
type in the information about a bank,
and FDIC will tell you whether it is
If you're asking whether uninsured
deposits should be safe you'd need to
check out the
bank ratings section and get the
independent ratings on the banks.
Answer 2: Selecting a "good" CD term
means gazing into the future. If rates
will continue to rise in coming years
short-term maturities let you roll the
CDs into higher yielding ones, but if
today's rates are the high point in this
cycle then it might make sense to lock
in rates for as long as one can.
Unfortunately, I'm not very good at
predicting the future so I suggest a
concept we write about called
yield ladders. This technique means
you don't have to guess which direction
rates will move.
Q: Two of the EE bonds purchased were stolen.
How do I file a claim for this loss.
Answer 1: Bonds that are lost, stolen,
mutilated, or destroyed can be replaced
free of charge as long as the Bureau of
the Public Debt can establish that the
bonds haven't been cashed.
To assure that the bonds can be
traced, owners should keep records of
bond serial numbers, issue dates,
registration, and social security or
taxpayer identification numbers in a
safe place separate from the bonds.
Answer 2: To get your bond replaced,
Form 1048. On this form, provide the
approximate issue date along with the
complete names, addresses, social
security number that appeared on the
bond, and the bond serial number. If you
don't know the serial number or
denomination, just write "unknown" in
the space provided.
If the bond owner is
a minor, the form should be signed by
both parents and the minor's age and
social security number should be
included. Mail the completed form to:
Bureau of the Public Debt, Parkersburg,
WV 26106-7012. Replacement bonds will
still show the original issue date
Q: I'm 57 years old and already retired. I have
$500,000 cash. How can I generate $4000/month
from this money?.
Answer 1: If you put $500,000 in a
shoe box and withdraw $4,000 a month the
money runs out when you're 67 and a
half. Alternatively, if you could net
9.6% a year you could receive $4,000 a
month forever and pass on the $500,000
to your heirs.
If you can't average a 9.6% or higher
return you're going to need to make some
choices with the understanding that
higher potential returns typically mean
greater risk of loss.
Answer 2: If you earn 5% your $4000
monthly income lasts until you are age
73, 6% will get you to age 74, and 7%
will get you to age 77 - all of which
may present a problem because the
current life expectancy for an age 57
male is 81 and 83 for a female. The most
honest answer is if you take out $4000 a
month you could easily run out of money
before you die.
You either need more money or a
smaller income. What's the best blend of
investments to accomplish this? Sorry,
we don't offer investment advice.
Q: If I have more
than $250,000 in a passbook saving account am I
only insured to $250,000 limit? How about if it
is a joint account? $250,000 per person for a
total of $500,000?
Answer 1: Yup
Answer 2: FDIC covers up to $250,000 in
deposits for one owner at one insured
bank, but there are different categories
of owners that may allow one to increase
A more complete answer is available
Q: Are CD's paying
interest based on a market index a better choice
than an indexed annuity from a strong insurance
Answer 1: Both index-linked
certificates of deposit and fixed
annuities offer the potential for more
interest than you might earn in a fixed
rate CD or annuity. It really comes down
to which place gives you the better
upside potential - which gives you
better index participation.
Both the CD and fixed annuity are
safe money places with the edge going to
the CD because of FDIC. However, in
every index CD I've seen the index
floats until the end of the term - if
you have a 5 year CD the index level is
not locked in until the end of the 4th
year. Many index annuities reset and
calculate interest earned annually.
Answer 2: I agree with Sam, and I have
couple of other points to think about.
Interest growth within the annuity is
not taxed as current income. Interest
growth in the CD - unless the money is
in a qualified account like an IRA - is
taxed. In addition, there are index
annuities that guarantee to pay more
than the original principal at the end
of the term even if the index declines.
Although FDIC is very safe it is good
to know that no one owning an index
annuity has ever lost money because the
insurance company failed.
Q: How much does an
index annuity pay?
Answer 1: Whatever it is, it could
always be a little more, couldn't it.
I've seen index annuity returns back in
the '90s over 40%! And there were some
that credited double digit interest
rates last year.
Answer 2: Although index annuities have
once in a while produced a very high
rate of interest for one year, you need
to remember that if the index goes down
you may not earn any interest for the
next year. Index annuities have averaged
returns that are competitive with CD
rates over the longer term, but this is
not a guarantee they will do so in the
future. They will not produce double
digit interest rates every year, but if
they earn 1%-2% more than another safe
money place the index annuity will be
worth much more over time.