Investing 10% Withdrawn from Equity Index Fund
I purchased an Equity Index Fund at a Senior meeting seminar! I feel I am stuck with this investment. I am allowed to withdraw 10% once a year. My question is where should I invest this money or can I get it all back without penalty?
This money is my IRA and is tax deferred, but once in my possession am I required to pay tax on it? What are recommendations and ideas?
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posted by Jeffrey D. Voudrie @ 12:42 AM
2 comments
2 Comments:
I’m sorry that you’ve had this experience. I doubt it’s any consolation but you aren’t the first!
If you’re free-look period is over then you probably cannot surrender the policy without paying a penalty. There are cases where the sale was egregious enough that the insurance company will refund the money, but those are few and far between.
So, it’s more a matter of trying to find the best way to manage the situation. You can transfer money from it to another IRA without incurring the tax penalties. Using the 10% penalty-free withdrawal is one way to do that. Other than that, it is a matter of considering the outcome if you stay in for the number of years required and compare that to how much you would have to earn in a different investment to come out ahead.
In other words, let’s say you have to pay a 10% penalty to get out of it. If the annuity earns 6% each of the next 10 years then what rate of return would another investment have to earn to make up for that 10% and still beat the 6% per year. (I don’t have my calculator with me so I can’t calculate that for you.) Then it’s a matter of getting an idea of the likelihood of that happening in other investments with a level of risk that is acceptable to you.
Thanks for your reply! I'll live with the contract, withdraw the 10% annually and invest it in another IRA! Thanks again! Merry Christmas and Happy New Year!
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