4

~8 years ago, when I was in my mid 20's, I wanted to start investing but had no clue what route to take. I researched a little and decided a Roth IRA would be the best place to start. A friend's uncle worked in finance and said he'd set it up for me and I sent him a $2000 check.

I didn't pay attention to that investment for many years. When I finally did look at it I found out what he set up was a "Super Max Annuity" (that was done via a Roth IRA). After reading about what an annuity was it seems like this was a really bad choice for someone in their 20's and not what I asked for besides. I even read that some unscrupulous financial advisers push annuities because it earned them easy commission. I feel a little taken advantage of; it barely earns enough to keep up with inflation (~2.15%).

Should I take the 10% tax hit to pull all the money out and invest it somewhere else?

Should I tell my friend's uncle (who is still the "representative" for the account) that I'm unhappy with what he did and ask for options to roll the money into some other type of investment that won't incur the tax penalties?

Or should I even consider leaving the money where it's at?

  • Annuities have higher commissions and there are merits to some of them if you understand the trade offs. But the issue at hand is whether a "Super Max Annuity" paying 2.15% per year a good investment for someone of your age. I don't think so. Before shutting it down, determine if there are any surrender charges. I'd be leery of continuing a financial relationship with a friend's uncle who decided that this was a good investment for you and didn't make sure that you clearly understood what you were buying. – Bob Baerker Jul 6 '18 at 11:03
7

Move it to a different investment. As you rightly said, annuities are good for the provider, and better for the person making the contract; but not for you.

There is no need to pay 10% tax hit - you can move it into another investment, if needed to another institution, and still keep it within an Roth IRA.

Just research where you want to go with it, open the new account, and tell them to pull the existing investment over. The target institute is normally eager to help you move money to them.
If you have no idea where to start, look at Vanguard or Fidelity index funds, and learn some basics. For people who don't want to learn many details, this is probably a good place to go.

  • 1
    But OP should check for any surrender fees that may reduce what can be taken out of the annuity. – nanoman Jul 6 '18 at 6:45

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.