Advisor Recommending EIA

Q. I have $220,000 in a variable annuity that carries a 7% penalty plus other expenses if I withdraw the money. My money is in a MM act currently paying nearly nothing and having fees taken out on a regular basis.
The advisor who sold me on The Security Benefit Variable annuity has suggested I switch to a Indexed Annuity. It would give me a 10% bonus to offset the penalty.

I have real reservations about the indexed annuity.

Any info you can give me would be appreciated

A. The first word of advice is to find a different advisor!!!

It is unconcscienceable for any advisor to recommend you take a large surrender penalty on one high-commission product to move it into another high-commission product. The compliance department on most large firms would never approve such a transaction. For instance, one of the firms I used to be with would only allow that if the surrender penalty was less than 3%.

What is being recommended in the annuity version of churning. You are in a bad position having an investment you are dissatisfied with but are trapped by the surrender fee. The switch being recommended would be extending the period even longer. It's like having a car worth less than you owe on it and the dealer allowing you to roll that into a loan for a new car. You would then owe more than the new car was worth--but the dealer would have made another commission!

The VA you are in should have a fixed account that is paying around 3% that you can use instead of the money market. That would be your best bet. Withdraw the penalty-free amount each year and move that part to something else--but something else without surrender penalties.

Check out my website at www.guardingyourwealth.com for additional articles about investing.

Also, if you would like some free information about the revolutionary (patent-pending) way I manage money that doesn't have any up-front fees, no commissions and no big surrender penalties, just let me know.

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