Years ago, I purchased a small annuity that pays a guaranteed 4 percent. I can add money to it. The surrender period has ended, so I can withdraw the money whenever I want. Since certificates of deposit are paying less than 4 percent, do you think it’s a good idea to add money to this annuity? — AW
You’re right, that’s a very good rate, said certified financial planner Jon W. Ulin of Ulin Financial Group in Boca Raton. It might be years before we see a similar rate on bank certificates of deposit.
But before you make the move, consider a few risks. One is that on the next anniversary of your annuity contract, the rate could be reset up or down. You’ll have to check with your carrier to find out that date. Another risk is that if rates go up while your money is in the annuity, you won’t benefit. Third, you are taking something of a risk on the creditworthiness of the insurance carrier, although for you, that might be limited if the value of your annuity is less than $100,000. In many cases, including in Florida, there’s a state guaranty association made up of other carriers that will pay out amounts up to a $100,000 limit if the carrier for some reason cannot do so.