Help! My annuity paid zero interest last year

Q: I went to a seniors seminar on investing and bought an annuity from Alliance, and put it in S&P 500. This year I received no interest on my money. Is there a way that I can get out of this annuity? And should I put my money in another annuity?  I am a single 67 year old woman and other than Social Security, I have no other income.

A: Your annuity contract will describe the rules for getting out of your annuity and the price for doing so. Many annuities have a surrender charge that extends for five or six years or even longer. The charge declines as you get closer to the end of the penalty period. However, you usually can take a certain percentage of your money out each year without penalty. You will have to decide whether getting out is worth paying the penalty.

My opinion: It is NEVER a good idea to put all your money in any one investment, whether it's the Standard & Poor's 500 Index or a jumbo CD and it is NEVER a good idea for a retiree to buy a variable annuity with a surrender charge. An exchange for a better, lower-cost annuity can be appropriate if you don't want to cash out because of a big built-up tax liability. However, it doesn't sound as though that's your situation. If you decide to stick with your annuity, you should diversify your investments so you don't have everything riding on the S&P 500 index. 

Comments

[Tony Bahu]

Let me start by saying a couple of positive things, then I will deliver the negative news.

Whether you should get out or not is not such a simple question to answer. On the postive side of things, if you received nothing, then chances are if you were in the market, you would have lost money. These annuities are designed to protect you when the market goes down. That's the good news (ironically---not making money is not really good news).

Now, for the negative. I am assuing the name of your annuity company is Allianz, not Alliance. My guess is you received some kind of bonus to get in this annuity. If you did, chances are your penalties are VERY steep to get out. Unfortunately, you probably have a long term to be in this (10 or more years) and it's going to cost you a hefty amount to get out (15% or more).

With that said, it doesn't mean you need to get out. Just because you didn't make money wouldn't be a reason to necessarily bail. It would be wise to assess whether or not that annuity is aligned with your financial goals. This isn't an easy thing to do but a professional who can give you an unbiased opinion would be the best suggestion.

On the flip side of all this, if you were sold an unsuitable annuity and this isn't or never was the right annuity for you, there may be measures you can take. With the risk of sounding 'salesy' visit AnnuityMD.com for more information. There are ways to get out of an unsuitable annuity if in fact it was sold to you inappropriately. Therefore, there is help but the first thing is that you must assess where you stand and under what pretenses you were sold the annuity.

I hope this helps!

Sincerely
Tony Bahu
CEO
AnnuityMD.com

current sentiment claims the S&P will rise dramatically this year..

you can put your money in the fixed interest strategy at time of renewal if you think that'll do better in fixed interest like a cd, than the s&p or you could use 50/50 and put some in each. You may have a policy with an annual reset so if the s&p goes up you'll make money. Be glad your not in a variable in which case you would have actually lost money when the market went down. In the index you should get a new start every year with the market being lower, since it went down last year you may be in a good position if the market makes up what it lost, you'd make it in a gain of income rather than just getting your principle back as you would be in a variable annuity in the same situation.