Dear Harry: I know you don't like annuities, especially variable annuities. Now I know why. We bought this variable annuity six years ago, and now we're caught between a rock and a hard place. The annual fees are eating up any gains we have. Over the period we have it, the fees have averaged a little more than 2 percent. We are aware that the major risk in the policy is with us, not the insurance company. The agent who sold us the policy tried to give us some assurance that it was still the "best investment for those who are nearing retirement." He sounded like he had just memorized the company line, because he couldn't explain why. There's a 4 percent fee if we cash in now. Any advice would help.
What Harry says: I have found only a few instances in which a variable annuity makes sense. I'm sure you got a copy of your annuity's prospectus before you put your John Hancock on the dotted line. Even if you read it (and you'd be one in a thousand), I'm sure you found it hard to follow. There is probably little, if any, gain on the amount you originally put in. If you are retired, you should consider rolling it over to a fixed immediate annuity with your current company after comparing their terms with two other companies. Don't hesitate to roll it over to another company after considering the surrender cost. If you're not retired, take the 4 percent hit and fully fund any IRAs or company retirement plans you have.